Peter Welch is head of sales and distribution at Bridgewater Equity Release
One of the common challenges I’m posed by equity release advisers is how to effectively market equity release advice. Despite the undisputed latent demand for the products the UK public still, for whatever reason, isn’t ready to see equity release as a mainstream retirement financial planning solution.
This got me thinking about why this might be the case. One obvious answer is that those in later life often assume the easiest and most straightforward way of releasing equity is to sell their home and buy a cheaper one – trading down, or for some they may opt to move into rented accommodation.
This certainly makes sense as the UK is a home-owning nation; many older people live in their own homes and this is their most valuable asset. Fifty years ago the average home cost about £2,500 now the figure is more like £160,000 which is why many retired people are choosing to move to a smaller, less expensive property and bank some of the gains they’ve made during their working lives.
The number of people making this choice is increasing as are the number of reasons for choosing to move. For example, moving to a smaller property means lower upkeep costs such as council tax, gas, water and electricity. And many retired people simply want a property that is more manageable during their later years.
Now you may be asking yourself, what’s this got to do with generating equity release business? Well, those who know me will be aware of my interest in, and study of, psychotherapy. When working with individuals who are very resistant to change therapists sometimes use paradoxical interventions, for example, someone working on weight loss but with no success might be asked by their therapist to “go away and put on more weight”. This will often have the reverse effect and the subject will end up losing weight – the opposite to what they were asked to do.
A possible area I’m suggesting advisers might want to invest marketing effort into is a ‘trading-down’ service. This could (for a fee) include initial advice to older customers on the pros and cons of trading down, negotiating fees with estate agents, solicitors, removal companies, etc plus negotiating the sale price of the home with buyers and the purchase price of the new home with vendors. Additionally, customers may need help with how best to invest the cash released as well as general ‘in retirement’ financial planning advice. Finally, there are opportunities for ancillary product sales such as buildings and contents insurance, utilities, wills and even funeral plans.
Such a proposition should sit very neatly with the services offered already by equity release advisers and is a possible area for diversification.
Now, back to my point on paradoxical interventions. Marketing the benefits of trading down will inevitably get customers thinking seriously about this option. Then, either on their own, or maybe with the help of an adviser some customers will exclude moving as an option as it won’t work for their personal circumstances. For many moving house is not a suitable choice, either because they like where they live or they don’t want the costs and inconvenience of moving house during later life. In percentage terms I estimate the cost of moving from a £300k to £200k property to be at least 10% of the cash released if you include estate agent, legal, stamp duty and moving costs. Finally, there may not be a sufficient difference between what they can sell and buy at to make the exercise worth while in the first place.
Therefore, for those who don’t want to trade down, or who can’t trade down, equity release should come into the equation as an option worth serious consideration. The point is that by providing a service for non-equity release solutions you should develop a growing client base for equity release. Advisers need to make sure they are there at the start of the decision-making process and they can certainly do this by broadening and diversifying their service to reflect the fact that there is no ‘one size fits all’ for those considering their later life options.