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Pandemic shifts equity release perceptions but family involvement still ideal ‒ analysis

  • 12/10/2021
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Pandemic shifts equity release perceptions but family involvement still ideal ‒ analysis
The challenges of the last year and a half have led to a change in attitudes towards the idea of equity release, brokers have reported, but it remains vital that family members are involved in the process.

A host of brokers have told Mortgage Solutions that the pandemic has led increased numbers of families to talk about their plans for the future and explore how equity release could potentially address them.

Yet brokers have emphasised that it is essential for all advisers to include not only the older homeowners in those discussions, but also their family members.

Fears over family approval

A study by the advisory firm Boon Brokers has suggested that around one in eight (12 per cent) homeowners aged over 55 had been put off opting for an equity release plan because they were concerned their family would not approve.

This rose to 15 per cent in Scotland.

Part of this reticence appears to be a lack of understanding around how the plans work, with the study finding significant numbers of respondees were worried the plans would leave their children with debts to pay off.

Gerard Boon, founder and partner at Boon Brokers, noted that while some older homeowners feel the need to preserve the largest possible inheritance for after they’ve passed away, in many cases their loved ones would most benefit from that money now rather than years down the line.

He continued: “There are a lot of misunderstandings around modern equity release products in general and still a lot of suspicion. There’s no denying that when they were first made available, some products weren’t fit for purpose and mis-sold.”

Misconceptions about equity release

Andy Wilson, director of Andy Wilson Financial Services, said that while his clients are always encouraged to discuss their plans with their families, there are times when they choose not to, with the reaction of loved ones often a factor.

He argued this tends to be down to “unfounded concerns built around the common misconceptions about equity release” and a natural fear that “their parents are about to be ripped off”.

Wilson continued: “I can put the client’s minds and apprehensions at ease by explaining the current options thoroughly, the same can be done with family if I am given the chance. One question I sometimes use if the parent’s decisions are challenged is to ask whether the children might be able to help mum and dad financially, given they have a need for some cash? This tends to make the children re-think their opposition a little.”

He concluded that ultimately it’s down to his clients whether they want to keep their arrangements private, and he has to respect that, documenting their reasons for doing so.

Family members ask the best questions

Sami Bickford, managing director of The Equity Release Lady, said that her firm actively encourages clients to discuss their intentions with their family, but noted that “more often than not they have included their family from the very start”.

Family members are invited to be present during the meetings, with questions from everyone encouraged. Bickford noted: “Often the children or beneficiaries of our clients will ask the most important questions.”

Bickford added that if a client does not have the support of their children or beneficiaries when making a decision, then her firm encourages the client to invite a close relative, friend or simply someone they trust to be present as “we feel it is important they have someone to discuss their decision with, when they have left our office.”

Steve Wilkie, executive chairman of Responsible Life, said that family members are usually involved in equity release decisions by his clients, noting that would-be borrowers are encouraged to bring their families into the conversation at an early stage.

He continued: “The customer benefits greatly from that support and guidance. In fact, if someone else isn’t present for the fact find our advisers perform with a prospective customer, then we record that and actively encourage them to invite a friend or relative to participate.”

The role of the pandemic

The pandemic has played a part in shifting the perception of equity release, according to Bickford, with families having had more time to think about their financial plans for the future, research their options and get a better idea of how equity release actually works.

She continued: “After a very difficult couple of years, we are finding that families want their parents to take that holiday, move home to enjoy a garden, get that new kitchen. We hear very often: ‘We just want our parents to be happy, it’s their money’.”

Shifting perceptions

Stuart Powell, managing director of Ocean Mortgages, said it was very rare that his firm encountered clients who are reluctant to discuss the idea of equity release with their family, which he put down to both the improving reputation of the industry as a whole and the role of the pandemic on people’s perceptions.

He noted that his firm was seeing an increasing number of clients approaching him for advice, as they were looking to gift money to their loved ones, often for use as a deposit.

Powell added that involving the family in these discussions is important for advisers from a compliance perspective: “It is always a great idea to discuss equity release with parents and family as it is the children whose inheritance is likely to be affected by their parents taking out equity release.”

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