Chris Prior is Manager Sales and Distribution at Bridgewater Equity Release
2013 was certainly the most positive year for the equity release market in some time.
The yearly statistics from the Equity Release Council emphasise this fact with over £1bn of property wealth being released and a particularly strong second half to the year saw 10,000 new customers releasing £594.3m of equity.
All good news but we are still only scratching the surface of the potential for this sector and a few figures will reveal this.
Firstly, 800,000 people retired in 2012 and while the yearly number drops slightly when we project ahead we will still have over 650,000 new people retiring in 2017.
Homeowners own nearly £800bn of unmortgaged property in the UK – an increase of over £33bn in the last year. If equity release could fulfil its potential and take just 1% of this marketplace, we would have an £8bn market – eight times bigger than what we saw in 2013.
This is clearly a marketplace with potential – all the demographic and underlying drivers suggest it could be utilised much more.
Talking to advisers about their advice businesses the main issue still remains securing enough leads to make it worth their while.
Leads remain of course the Holy Grail and there are a number of routes advisers should be taking to ensure they cover off all bases whether it’s through using introducers, buying leads, mining existing client banks or securing referrals.
Advisers need to work on a multiple mix of these methods to get where they wish to be.
I’m still sometimes surprised at the attitude some advisers have to one or more of these lead generating methods.
For example, some are adamant that they will not buy leads from businesses providing leads saying they cost too much and do not have a high enough completion rate, while others only use this method and are not as active in securing a group of quality introducers.
The first point I always address with advisers is for them to make sure they know exactly what income they want to achieve each year out of their equity release business.
Having an income target means you can break that down in the money you need to earn per case and from this work out the number of completions, the level of leads you need to bring in to earn that and where is the most cost-effective source of those leads.
It means putting together a simple plan but it can be effective in securing the target.
This exercise will also allow the adviser to see what they need to pay out in order to secure the necessary income.
I recently did some ‘back of the fag packet’ calculations which compared both introducer leads and paid-for leads and it shows the need to ensure you don’t put your eggs in only one basket.
In general terms for an adviser to secure £60k gross earnings pa from their equity release business, with an average of £1.3k per case, means they will need a total of 46 completions.
For introduced leads the conversion rate tends to be stronger at two out of three or in many cases even one from one and for this most advisers will need 69 introducers providing around one lead per year.
Buying leads in is a rather different scenario because the conversion rate tends to be around the one from five mark.
This means you would need around 230 leads but advisers will know it’s going to be almost impossible to buy 230 equity release leads a year.
However, working with a combination of introducers and bought leads, not forgetting referrals and existing clients should mean you are able to get to your income target.
Not forgetting the fact that even if only one out of five bought leads turns into an equity release completion, the other four leads could potentially yield other types of business plus you can offer other product options to all clients such as wills, LPAs, funeral plans, long-term care, to name but a few.
The important thing is not to be too cynical about any method of bringing in leads. It may not have worked for you in the past but there are always opportunities to look again at a particular method, particularly in the paid-for leads sector as the quality can be markedly different depending on the source.
Being open to all the potential lead-generation opportunities means you are giving yourself a much better chance of hitting (and perhaps surpassing) that income target.