Peter Welch is head of sales and distribution at Bridgewater Equity Release
Supposedly ‘the most depressing day of the year’ took place on Monday 17th January (the happiest is Monday January 31st) . ‘Blue Monday’ as it was termed was given this moniker due to the fact that a significant number of ‘depressors’ combined – firstly, of course, it’s a Monday which never holds much joy for large numbers of people, then there’s the January weather – it rained for most of the day across the UK. Added to this was the fact many people’s credit card bills were hitting the doormat full of Christmas shopping ‘cheer’ and finally the 17th was deemed to be the day when most people gave up on any new year’s resolutions they had made.
All in all, it might have been enough to make you spend the day in bed to forget the whole damn thing. (Monday the 31st is the happiest for all the opposite reasons, such as being paid for the first time since Christmas)
I would however suspect that for many in the Coalition Government, the 17thof January paled into insignificance compared to the day they had on the 25th when the Q4 GDP figures were published. I suspect many sensed early on in the day that it was not going to go as smoothly as they hoped.
No-one was expecting a 0.5% contraction, even if we take out the extreme weather which battered the country – a loose excuse anyway I feel. We are just one quarter’s contraction away from slipping back into recession, which makes for particularly gloomy reading. Add in the outlook for interest rates, the housing market, tax and fuel prices and it would perhaps not be a stretch to already call January 2011 ‘the most depressing month of the year’.
However, I am not going to spend the rest of this blog spoiling your day. Instead, the first point to make is that January is just about finished, indeed by the time you read this we will probably already be in February. The second point to make is that there are some positives out there, namely the fact that changing economic circumstances mean changing consumer needs and it is probably safe to say that the traditional solutions which may have worked in the past may no longer be able to satisfy them.
All this change may well mean you, as an adviser, have to look at the new opportunities that are available, particularly if you are only offering ‘traditional mortgage advice’. I would suspect that few advisers only ‘do mortgages’ these days however there may still be sectors which you are not involved in that may provide solutions to problems which cannot be solved with a mainstream mortgage product.
For example, advising first-time buyers will be a core part of most mortgage adviser’s work, but how many first-timers have you seen over the last couple of years who have not been able to secure finance? The fundamental driver is the lack of high LTV mortgages and the difficulties today’s first-time buyer has in pulling together the large deposit that is needed to get on the property ladder.
Of course, if you are not involved in a sector like equity release then a number of potential solutions are not available to you. Again, for example, it may well be that the first-time buyer’s parents or grandparents would like to help out but don’t know how to. They may also be happy to use the equity in their home to do this as an early inheritance, given that they would be leaving it to them in their will anyway. The same solution could present itself with regards to funding University fees – again grandparents are often looking for ways to fund the cost of their grandchildren’s education and equity release could provide the solution.
Many advisers will also have a strong client base made up of those at, or near retirement. People in later life often move home at this point for any number of reasons – a change in lifestyle for instance. Sometimes they would like to live in a home they can’t buy for cash and don’t qualify for a standard mortgage, for example, selling a terraced house and moving to a more expensive bungalow. These areas of growth in demand for finance products fit naturally in a mortgage adviser’s portfolio, however the mainstream mortgage products aren’t always able to meet the needs of older clients. There is much more scrutiny and responsibility for lenders providing mortgages into retirement and while the more traditional option cannot provide the solution, equity release plans can.
Now, this might look like I’m advocating all mortgage brokers rush off and sit their equity release exams immediately and vary their permissions, but I’m not. The reason why I’m not suggesting this is that equity release has a unique sales and advice process, customers expect to be treated differently and, quite frankly, some advisers are not suited to this type of advice. Equity release is a niche market and needs to be treated as such; it cannot simply be an ‘add-on’ to the advisory business.
What I am saying however is that the uses of equity release are changing and it is moving away from the traditional perception of those who are purely short of pension income.
Therefore, my advice to all mortgage advisers is to track down an equity release specialist near you and invite them for a chat to talk about the potential opportunities for referrals. At worst it will cost you an hour of your time and the price of a cup of coffee. They will be able to talk to you about various sales ideas and recent interesting cases they've written which may be of interest to your own client bank (or their mums and dads).
At best it will mean you generate additional fees/income helping clients you couldn't help before, leaving you free to concentrate on your core business. It just might turn a somewhat depressing start to the year into a reason to be cheerful for you, your business and your clients.
