Judging by the ferocity of debate at Mortgage Solutions’ recent roundtable discussion on equity release (Mortgage Solutions, 5/03/07, p38), it could be argued that the sector is still suffering from something of an identity crisis, with little consensus on the best way to promote related advice and products both to consumers and the mortgage industry at large.
With this in mind, the news that the Personal Finance Society (PFS), together with the Chartered Insurance Institute (CII), are canvassing broker opinions about the possibility of setting up of a professional organisation for intermediaries in the equity release sector has received a mixed reception.
According to Safe Home Income Plans (SHIP), the trade association for lenders in this sector, £1.1bn of new business was written by its members in 2006, with this set to reach £1.5bn by the end of 2008. Although still a small part of a much larger mainstream mortgage market, the pace of growth and increased consumer awareness of equity release can be used as arguments for better representation of intermediaries. Increased professionalism in the sector is also documented by the introduction this month of the regulation of home reversion plans, which SHIP suggests will attract more brokers into the sector.
Branded under the working title, Secure Advice For Equity Release (SAFE), the new organisation is scheduled for launch later this year. However, it may be some time before the PFS is able to outline exactly what SAFE will entail, and give a blueprint of its role in the marketplace.
This is certainly not the first time such an organisation has been proposed. Last year, speculation was rife that the Association of Mortgage Intermediaries (AMI), which has its own standing committee for equity release, was to form its own ‘little sister’ body for the sector. At its most recent meeting in March, the standing committee put forward proposals for a directory of qualified equity release advisers (Mortgage Solutions, 19/03/07, p14).
Dean Mirfin, business director of Key Retirement Solutions and a member of the AMI standing committee, believes that the PFS seems to be taking a more ambitious approach. “In its nature, the PFS is a professional body, not a trade body like AMI,” he says. “However, the evidence suggests that the new organisation will offer more than just guidance.”
The right process
In its broker questionnaire (see box-out below), the PFS says that a ‘quality marked’ equity advice brand could be created that incorporates not just an advice process, but will also monitor standards with a ‘code of conduct and disciplinary process’.
For Mirfin, monitoring of intermediaries could prompt a mixed reaction. “It is questionable how firms would feel about the PFS telling us what to do,” he says. “The devil is in the detail, but we all have varying view abut what defines good practice, and that doesn’t mean we are all wrong,” he adds. “If you start to ‘quality mark’ something, you must have a robust way of policing it.”
The PFS questionnaire also highlights the possibility of the organisation which would use ‘major consumer facing marketing alongside the SHIP brand’. In general, equity release brokers have so far been unanimous in their view that further consumer promotion of the equity release sector is needed. However, with SHIP also taking on a role in the promotion of the sector, is there not a risk that the two might overlap?
Jon King, chairman of SHIP, believes the two organisations could comfortably co-exist. “We will be working close together with the new group, and they will be leaning on us for a knowledge base,” he says.
Whether or not the new organisation will come to fruition will ultimately depend upon intermediary feedback and, perhaps more importantly, if these brokers will be prepared to fund the service.
“Speaking from a broker’s point of view, we would have to weigh up the costs involved and go from there,” says Andrea Rozario, director at Private Finance. “AMI has already released its guidance notes, and it is a positive thing that the PFS is showing its interest. I think it would be a good idea for everyone involved in the equity release market to pull together.”
Mirfin adds: “Many good initiatives like this have been raised in the past, but died a death because of a lack of funding. With this, the question has to be what is the financial catch? If you are already a member of the PFS, will you have to pay extra?”
No matter how the PFS chooses to take its ideas forward, it will be the intermediaries themselves that will have the most say in getting SAFE off the ground. n