Expert: Chris Smyth, Equity Release Partnership Development Manager, LV= Facilitator: Tony Crane, Consultant
Headlines:
- The negative perceptions of equity release stem from issues with legacy products. These can be overcome by educating consumers and advisers on the significant advancements in today’s offerings.
- The recent improvements in equity release product design includes flexible repayment terms, shorter early repayment penalties, inheritance protection, and added services like virtual GP access to attract a wider audience.
- There are differing perspectives between financial advisers and mortgage brokers in equity release recommendations, a more aligned approach that considers comprehensive financial planning should be fostered.
Discussion points:
Legacy issues and negative perception
It was discussed how negative perceptions of equity release are rooted in legacy product issues and highlighted the need for educating both consumers and advisers on advancements in modern equity release offerings.
Modern innovations and features
Delegates acknowledged improvements in product design, such as flexible repayment options, shorter early repayment charge periods, inheritance protection, and additional features like virtual GP services, which increase the appeal of equity release for today’s consumers.
High interest rate barrier
High interest rates, currently around 5-6%, were noted as a significant barrier to adoption due to the potential for negative equity, underscoring the need for more competitive and flexible pricing.
Adviser-mortgage broker dynamics
Delegates discussed differing approaches between mortgage brokers and financial advisers, with brokers seen as more inclined to recommend equity release without holistic financial planning, leading to tensions with advisers who emphasise comprehensive advice.
Specialised products for wealth management
The group proposed a tailored equity release product for wealth management, incorporating features like annual reviews, transparent pricing, and a collaborative product development process with advisers to ensure alignment with high advisory standards.
Consumer education and alternative funding models
Emphasis was placed on the importance of educating consumers to overcome stigma and exploring alternative funding models beyond traditional annuity-backed approaches to add pricing flexibility.
Addressing financial challenges with equity release
The potential for equity release to address wider financial challenges, such as interest-only mortgage maturities, the gender pension gap, and providing financial assistance to family members, was highlighted as a driver for adoption.
Key takeaways:
- Explore and design equity release products that cater specifically to the wealth management sector, integrating advisor-driven features like transparent pricing, annual reviews, and collaborative development processes
- Launch initiatives to educate consumers and advisers on the improvements in equity release products, addressing outdated stigmas and increasing awareness of the modern product’s value
- Consider alternative funding models to allow for more competitive interest rates and flexible options to address concerns over high costs and negative equity
- Improve communication between mortgage brokers and financial advisers to ensure a unified, holistic approach to equity release recommendations
- Conduct further research into the demand for equity release as a solution to financial challenges like interest-only mortgage maturities, pension inequalities, and family financial support to expand its role in the financial advisory market
