It’s fair to say that ‘the Fourth Estate’, otherwise known as the press, has been the subject of a fair amount of scrutiny recently.
The highest profile case is of course the phone-hacking scandal currently engulfing the coalition Government, in particular, Downing Street’s director of communications and former editor of the News of the World, Andy Coulson.
Firstly, I should point out that I am a full supporter of the ‘free press’ and believe it is a vital cog in any society.
Without it, we run the risk of all manner of underhand practices and activity going unseen and unchecked – numerous examples abound of quality journalism which has revealed the true nature of what is going on in various positions of power – perhaps two of the best examples that come to mind are the Watergate scandal that engulfed the Richard Nixon Presidency and, more recently, the MP’s expenses debacle which was extensively covered by The Daily Telegraph.
However, the press cannot go about its business unfettered.
We are relatively lucky as workers within the financial services sector in that not only do we have a particularly strong and knowledgeable trade press but in the wider regional and national set-up there is a strong focus on both business and financial news.
That said, to my mind there can be a blurring of the lines – particularly in the personal finance press – between what constitutes the provision of information and what could be construed as advice.
There is a distinct danger that what is read by the public, and written by someone who has no financial advice experience or qualifications, could actually be construed as advice.
Those who work within financial services may be able to see the inaccuracies or the mis-information however the general public may take this as gospel, and this is obviously worrying.
The equity release sector is, it would seem, always fighting a battle of sorts with the personal finance press in order to maintain impartiality and to write about the sector and the products that are offered now, as opposed to what might have been available twenty years ago.
This disparity came to light again with a recent blog piece by Ian Cowie, personal finance editor, which was published on the Telegraph website. It went out with the headline, ‘Is equity release a rip off?’
Now, with the best will in the world, a headline such as this is only going to conjure up the most negative connotations when it comes to equity release – and this is before the piece has even started.
Without wanting to dwell on the article – which was based on recent Defaqto research that revealed the higher cost of lifetime mortgages compared to long-term fixed rate residential mortgages – there were a number of glaring inaccuracies which will have gone unnoticed by many.
For instance, throughout it refers to ‘home income plans’ which haven’t existed for many years; there is also barely a mention of home reversion plans and no information on their difference to lifetime mortgages and what they can offer the consumer.
For the majority of the piece equity release is used to simply mean lifetime mortgages.
Interestingly, according to a SHIP press release from the 4th February 2008, at that point lifetime mortgages were cheaper than mainstream mortgage rates (SVRs). As with all these things there is fluctuation and we are now in a different financial market place to that of 2008.
But the point is worth making and who is to say that in two years time the position of 2008 won’t have repeated itself.
Also, as the Defaqto release clearly states, there are two schemes available and the product cost of the no negative equity guarantee has to be taken into account.
This type of article can prove very damaging to an industry attempting to educate consumers about the, lest we forget, regulated equity release sector and one has to say that an adviser writing in such a way would be hauled over the coals by the FSA for being ‘unclear, unfair and misleading’.
It is enough to make your heart sink, especially when the industry has, and continues to, work so hard to ensure the consumer population has accurate information about equity release.
As I understand it, the House of Commons has asked for a full review of the issues regarding the press by the Standards Committee. I would like to ask for regulations that bind the professional press to the same high standards as advisers, especially where they hold themselves out as experts and offer opinion and advice to the consumer.
The Cowie blog talks about the quadrupling of debts before a consumer dies if they take on a lifetime mortgage, however this is pure scaremongering and makes no mention of the fact that choosing a home reversion plan avoids this kind of risk anyway.
It is also never mentioned that whichever scheme the consumer chooses, they would be fully protected and able to live and use the home as they wish for the rest of their lives.
As can be seen, the education responsibilities of those working within the equity release sector are ongoing. We should all take the opportunity to help those less informed understand the sector particularly as it is likely to grow in importance going forward as the financial spending review hits, the pensions crisis continues and our demographic picture tends towards the elderly.
Access to and the option to use a product such as equity release is just that – a choice.
The Government is making it clear that consumers are going to have to take more responsibility for their own retirement where they can afford to do so.
The spending of the past has got to be paid for and some of that may have to come out of the gains achieved in house prices over their lifetime. Even with the latest falls in property values, many people have achieved substantial ‘real’ growth in their investment in their homes.
Why should we not help people access that if they wish or need to – the bottom line is that the decision to release equity is often one not made on the basis of price anyway.
