Those of you with long memories will no doubt recall the sales rushes that resulted from the withdrawal of tax relief on life assurance premiums (LAPR), and later the withdrawal of Mortgage Interest Relief at Source (MIRAS). In fact, it took until 1999 before the latter form of tax relief was withdrawn on equity release products. There is nothing like a deadline to focus the minds of both intermediaries and your clients.
Really, the industry’s ‘habit’ of selling a product or an idea is still central to the way many firms operate. No week will pass by without an advert or article showing the reader a new angle or approach to generating new business on a specific plan or policy. Even the shape of the advice process has led many to become specialists in one area or another. Niche operators have given way to ‘niche – within a niche’ firms.
This has become very evident with mortgage advice firms over the years. Some have modelled themselves as specialists in the buy-to-let or commercial arenas, for example, and some have subsequently suffered as a particular sector has declined due to particular economic or social circumstances. A good example in the life and pensions area is the sale of pension annuities, where a product can be sold on the best rate, rather than shaping the annuity to fit a clients wider circumstances.
This will be increasingly important as continuing low interest rates and legislation from Europe drive down annuity rates, forcing providers to be ever more imaginative when it comes to product design.
The sales campaigns around the loss of tax relief are one of the rare examples of clients wanting a product rather than what a product does for their fundamental circumstances.
Taking it back to fundamentals – who wants a mortgage? It certainly won’t be on my Christmas list. The house it could buy, on the other hand, is a different concept altogether. And equity release is no different, with clients ordinarily having a particular need or desire that drives the enquiry. The adviser’s job is in part to find the correct and most competitive product but more fundamentally to ascertain whether the client’s particular circumstances suit such a purchase.
The new equity release system from Trigold will go some way to helping in this area by incorporating advice processes with the traditional sourcing system. This will help determine the appropriateness of a product not just which is cheapest. The equity release industry has a proven record of low complaint numbers, helped by the insistence on full advice for all clients, combined with independent legal advice.
The gradual move among advisory firms to specialise in one particular product or need, while understandable in an increasingly complex world does not really address the issue from the clients’ perspective. Clients want and need advice which puts them first and is not focused on selling products. The old life assurance joke that regardless of the problem, the answer is another policy has thankfully been committed to history.
The adviser as general practitioner has declined in number over the years, and it is often argued that complexity requires such specialist knowledge that no one firm can possibly advise across the full range of circumstances.
It can be argued that this flies in the face of client expectations, as often they are asking for advice to simplify their circumstances rather than to ‘peel off’ one area and leave the rest untouched (and maybe badly affected). After all, this historically is often where things have gone wrong and led to problems related to inappropriate sales.
The recent Retail Distribution Review (RDR) has at its core the concept of the client driving and understanding what they are paying for. For me, the hope is that this transparency will be the first step towards a return of more complete advice, where as an industry we avoid short-term promotion-led activity and return to the core values of holistic advice which by definition is client-centred.
Jon King is managing director of Hodge Lifetime