OpinionJun 3 2015

Let the good times roll - but adviser expertise needed

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Let the good times roll - but adviser expertise needed
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In all the hullabaloo surrounding our newfound pension ‘freedoms’ it is easy to forget that there are other areas of personal finance out there in this great country of ours where people are screaming out for quality financial advice.

One such area is equity release – a road my mother and father cautiously trod down a couple of years ago to boost their meagre income – a small annuity and a state pension – and extract some financial value from their beautiful bungalow situated on the outskirts of Sutton Park in Birmingham.

They seem perfectly happy with the outcome, although Dad is not well at the moment and I do not like to pry too much about their delicate finances. All I know is that a small inheritance, when the time eventually comes, is out of the question.

The equity release market certainly seems to be in robust health judging by the recent contents of my work email inbox.

Over the past couple of days, I received an email from “nationwide retirement specialists” (their words, not mine) Retirement Experience on the lookout for “exceptional equity release advisers”.

“The market for equity release is growing rapidly and Retirement Experience is expanding to cope with the demand,” it went on. The carrot that is commission – “excellent commission rates” no less – was dangled before my very eyes. Despite the “excellent remuneration package” on offer I will not be applying this time around, although given all the negativity around the future of print journalism I cannot rule out a later-life career change.

It is not just an invite to join the equity advice fraternity that I have received. I have also been asked if I want to release equity from my home by a company called Equity-Release1. Again, it is not an offer I will be acting upon for a very long while, but thank you all the same Equity-Release1 – allegedly the “prime equity release comparison site in the UK” (yes, their words, not mine).

The latest data on the sale of equity release plans suggests that demand among elderly homeowners is robust. In the first quarter of this year, nearly £341m of property wealth was released through equity release plans – up some £11m on the first quarter of 2013. Plan sales for the quarter rose from 4,983 to 5,100, prompting Dean Mirfin, technical director at Key Retirement, to proclaim that “property wealth is a major part of retirement planning and the contribution it can make is substantial, with customers releasing nearly £67,000 on average”. I do not think you can argue against that assessment.

Indeed, Bower Retirement Services, a growing force in the equity release advisory space, is predicting that the equity release market could double in size in the near future as consumer awareness increases and elderly people battle against a combination of inadequate pension savings and paying down existing debts. For advisers qualified to operate in this market, good times are surely around the corner.

The equity release market today is certainly far more consumer-friendly than the one I viewed with great scepticism 30 years ago when the likes of Fisher Prew Smith were running amok with its Rainbow equity-release scheme, and insurers were withdrawing from the market fearful of tarnishing their image further.

Today, no negative equity guarantees are the norm, enhanced lifetime mortgages are readily available, while most lifetime mortgage providers will now allow borrowers to stagger their release of equity, thereby controlling the amount of interest that is rolling up. It is no surprise that drawdown now accounts for some two-thirds of all equity release plan sales. All good stuff. We also have the advent of interest-only lifetime mortgages that come with both advantages (no roll up of interest) and disadvantages (the possibility of repossession if payments are not maintained).

What is just as heartening is that big financial brands are now looking to enter a market that has been dominated for a while by the mighty Aviva.

In April, Legal & General completed its £5m purchase of equity release specialist Newlife, confident that it will prove to be a shrewd business move as more people tap into their property wealth.

Then just over a week ago MGM Advantage, which bought Stonehaven earlier this year, announced it would be rebranding the combined operations ‘Retirement Advantage’ – and in the process offering a suite of retirement products, everything from good old annuities to ‘innovative’ equity release products. It has also already made a start on making its equity release plans more user-friendly with free valuations, flexible drawdown and higher loan-to-values. Hurrah. More please.

Speaking with equity income specialist Andrea Rozario – ex-director general of trade association the Equity Release Council and now chief corporate officer at Bower – a week ago over a glass of water and a bowl of risotto, she said she was confident that the industry had a rosy future. Indeed, she believes L&G and MGM will not be the last established financial brands to lend their names to equity release. Others will jump on the bandwagon. The more the merrier, I say. Competition breeds innovation and hopefully will bring down prices.

If I were an independent financial adviser and looking to broaden my business horizons I would be busy now equipping myself with a Certificate in Regulated Equity Release. The equity release market needs as many skilled practitioners as possible to ensure consumers end up making appropriate choices. Time to tool up?

The equity release market needs as many skilled practitioners as possible

Jeff Prestridge is personal finance editor of the Mail on Sunday