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‘Tech must assist equity release advice, not replace it’ ‒ analysis

  • 21/09/2021
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‘Tech must assist equity release advice, not replace it’ ‒ analysis
Brokers have welcomed the launch of a new online tool which helps potential clients get a better understanding of individual equity release plans, but have emphasised the importance of personal advice in ensuring the borrower makes the right decision.

This week adviser Equity Release Supermarket launched a new search engine tool called Smarter, which it claimed makes it more straightforward for potential borrowers to get an understanding of the plans that might be open to them, before actually speaking properly to an adviser.

Borrowers are invited to share deals about their case, like the purpose of the loan, whether they want to receive a lump sum or monthly income, and details of the property. They are then presented with a shortlist of equity release plans, allowing the potential customer to read up on the terms and conditions of each deal and do their own research.

Educating clients

Mark Gregory, founder and CEO of Equity Release Supermarket, said the firm was striving to be as “open and transparent” as possible, to ensure that when a possible customer speaks to one of the firm’s advisers they have confidence that equity release is the right solution for them.

He continued: “The current equity release landscape simply doesn’t cater for consumers who are hungry for knowledge and want to research their options in their own time. It is as if the equity release industry believes that consumers shouldn’t be given the opportunity to develop their own understanding, which we know from our research is a huge frustration and a reason why some are sceptical about equity release.”

Gregory noted that significant numbers of customers had asked how they could better understand equity release plans, without first speaking to an adviser, and emphasised that Smarter was designed to complement the advice process rather than replace it. 

“The information the customer provides to generate their results is shared with their adviser so that when their conversation starts, the adviser already has a detailed understanding of the consumer and what they are looking to achieve financially through equity release.”    

Borrowers enjoy unprecedented amounts of choice

Jim Boyd, CEO of the Equity Release Council, welcomed the launch of Smarter, noting that the pandemic had accelerated the role of technology across the equity release sector. 

Boyd added: “Vibrant competition means today’s market offers older homeowners an unprecedented choice of products that provide secure, flexible finance. Helping consumers to understand the modern market can open more eyes to the potential benefits of accessing property wealth in later life.” 

More to advice than picking the cheapest rate

Stuart Powell, managing director of Ocean Mortgages, said that he was all for any technological advance that helps a borrower find the right solution, and agreed that there were currently no tools for would-be borrowers which would help them find out the interest rates they may face based on the amount they want to borrow.

However, he emphasised that the role of an equity release adviser is not just to pick the right rate for the client, noting that initially his firm looks at options that are not even based on borrowing, such as savings, investments or even downsizing. 

Powell added that it was only by finding out about each individual client that an adviser could identify a product that meets their needs not only right now, but in the future too.

He warned: “A technology solution that gives the client a deal that they think is the right one, based purely on rate, could lead to clients ending up with the wrong solution for their needs.”

Brokers must equip borrowers with the knowledge they need

Sami Bickford, managing director of The Equity Release Lady, noted that while she would encourage greater education of possible clients, she questioned whether a search engine would provide the information they needed, possibly leading them down the wrong path.

She explained: “For example, if a client is looking to raise a certain amount to repay an existing interest only mortgage and the system tells them that amount is not possible to raise the amount they need, they may consider this the end of the line.

“If they were to come to an experienced adviser, they will know if the client has poor health and certain medical issues, this may mean they can get a higher loan to value and may be able to achieve their objective.”

Bickford added that it was down to individual brokers to provide potential borrowers with free guides, brochures and calculators covering all areas of the sector to ensure that they are equipped with the knowledge they need should they want to pursue an enquiry.

Tech can help raise the sector’s profile

Andy Wilson, director of Andy Wilson Financial Services, noted that the industry had been “pretty much a ‘closed shop’ to the public” for years, where the only way to research the products and options was to contact an adviser and invite them into your home, which could arouse suspicion, anxiety and nervousness among borrowers.

He added that services like Smarter could address some of the concerns among prospective borrowers, so long as they make clear the need for actual advice from a qualified adviser.

Wilson continued: “Only an experienced adviser will know the lender nuances, which can mean some properties or situations will have a limited appeal to lenders. Although the product is a mortgage, they are unlike anything available in the mainstream mortgage market, and need careful attention to details.”

However, Wilson emphasised that it was positive to see firms “grasping the nettle” by developing useful technology, noting that it will likely help to raise the profile of the sector further.

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