We are in danger of over-complicating equity release, warns Peter Welch, head of sales and distribution at Bridgewater Equity Release
There is a never-ending debate about equity release which seems to suggest that, with all necessary demand drivers in place, it could be the name or the actual ‘equity release’ brand which is somehow holding back the sector. We have all talked for many years about the strength of the market and that, increasingly, we are likely to see far greater volumes of business conducted in the future, particularly as key problems such as pension provision, social care funding, etc hit home.
The argument with the ‘equity release’ name is that a more consumer-friendly and somehow ‘simple’ product definition would make it a much easier sell and consumers would feel more inclined and confident in taking out such a product. To my mind, this is debatable in the extreme and, indeed, this kind of argument appears to miss the point around ‘equity release’ anyway.
When we talk about ‘equity release’ we are essentially talking about the products themselves – the home reversion plan and/or the lifetime mortgage which will allow the client to release funds from their property. Equity release is essentially the means to the end however, it is my belief that we should be far more focused on what that end might be. What is the need that the clients have that might be best achieved through releasing equity from their property?
To my mind, we spend far too much effort and energy focused on the product end of the equation rather than the customer need. This is why we have advisers regularly quoted in the press as saying it is a ‘product of last resort’ or that they ‘have never met a customer who it has worked for’. This type of analysis stems from the advice equivalent of putting the cart before the horse, or perhaps putting the product before the client need.
When a client presents themselves to an adviser, the first step in the process should not be to talk about products as soon as they sit down. It should always be about their current circumstances, what they would like to achieve and what may or may not be acceptable to them in achieving such a goal.
So, if a suitably aged client seeks advice and, for example, they are looking for ways to help a child with a mortgage deposit, or they are looking to upsize, or they want to deliver a cash injection to a business, what are the available options and what should be the response of the adviser? Perhaps, the client is looking for money to fund their retirement lifestyle, or they want to build a conservatory, or they are looking for funds to cover social care? What can the adviser offer as available solutions in order to meet these needs?
The point for advisers to make is to match up the need with the solution, and if the most appropriate solution is to go down the equity release route, then so be it. The adviser can clearly explain that to meet these needs and expectations, the individual(s) have the resource to be able to release equity from their property. This released equity will provide them with the finance in order to make that goal attainable.
This doesn’t sound overly complicated to me, and I doubt it would sound so to the client. To my mind we are in danger of over-complicating equity release when in fact we should be taking a leaf out of the life assurance book which is sold in terms of what it can provide the client with. It is a Plain English approach to advice and one that should be easily transferable to our market space.
Focusing on the need not the product should be a no-brainer however we appear still to be bogged down in the equity release product rather than the customer need. We could call the products anything we like – this is truly not the issue and until we understand this we are likely to be dealing with the status quo for a number of years to come.