While it’s now the case that advisers need to have exam qualifications for both lifetime mortgages and reversions, the FCA still allows firms to operate with only a lifetime mortgage permission, rather than both.
The other factor encouraging advisers not to actively participate in the reversion market is the fact that they have to pay to vary their permission. Again, hardly a conducive state of affairs to put both product strands on an even keel.
In our opinion to ensure a level playing field all ‘equity release’ advisers should automatically have permissions for both sets of products and firms will need to have the appropriate PI cover in place for both. Again, the distorted nature of the market means that insurers often assess firms offering home reversion plan advice as riskier than those that do not and there are higher premiums for cover.
This is quite frankly wrong because the client is only getting one half of the advice story – why should all stakeholders within the equity release sector be happy that the client only receives advice on one set of products when a reversion plan could provide a far more suitable option?
The argument that equity release advisers are somehow short of knowledge and training on reversion plans would not be an issue if both products were treated equally. Indeed one wonders how an adviser can call themselves an equity release specialist if they only hold their lifetime mortgage permission? Those in this market should be providing advice on both and, if they do not understand reversion products, they should seek training and support in this area.
Clearly, the lifetime mortgage market has grown and product development and innovation is ongoing however this does not mean reversions are somehow obsolete. It is up to advisers to make sure they include reversions as one of the potential options available otherwise they are doing themselves and their clients a real disservice.
In a very true sense, we still fully believe the plans have their place, that they should be part of any quality equity release adviser’s toolkit, and that news of their death has therefore been greatly exaggerated.
Chris Prior is sales and distribution manager at Bridgewater Equity Release