Chris Prior is manager sales and distribution at Bridgewater Equity Release
It’s often said that the worst thing about going on holiday is having to come back however this is a rather obtuse way of looking at what should be one of the best parts of the year.
If the downside of going away is returning to work then perhaps the worst part is those initial few days when you have to rewire your brain back into doing the tasks which, a week or two earlier, seemed simple and entirely natural.
This is a period of discombobulation and I find that the longer you spend away from work, the longer it can take to get back up to speed.
I mention this because of the ongoing debate in the equity release sector about home reversions, their place in the market and whether ‘specialist’ advisers are adequately reviewing them as a potential and credible product choice for their clients.
This issue is of course tied up with the fact that many equity release advisers have no permission to advise on reversions in the first instance and therefore one might question whether this product set is getting a ‘fair hearing’ when compared to its bigger, and rather better known, lifetime mortgage cousin.
At the moment I sense that many advisers are willing to trot out the line that reversions are currently not competitive when compared to lifetime mortgages so giving them full consideration is not really a priority.
And while it’s true to say that reversions are not offering perhaps as much value as they have in the past, to continue to dismiss them out of hand, and not keep up to speed with reversion developments, could be an accident waiting to happen for advisers.
The reason for this is what does happen when reversions do begin to become a more suitable option for a wider array of clients?
If the adviser has spent the last 6/12/18 months ignoring the reversion option entirely because of a misconception that they will never be suitable, how will they know of a change in product criteria or a provider returning with all product guns blazing?
To fully engage with the reversion market at this point will be very difficult given the hiatus they have taken from the sector, and who is to know how many clients they will have advised during this period who have gone down the lifetime mortgage route when the reversion option was by far the better option?
Again, add in the fact that many advisers cannot even advise on reversions and you wonder whether significant trouble lies ahead.
The point is that in this marketplace, ignorance will not be bliss – for the adviser or (more importantly) the client, and one wonders what their reaction would be post-completion when, for example, they find out they could have released 15/20% more cash from their property for the same amount of equity. This scenario is not beyond the realms of probability and could happen quite easily with some slight price tweaking from reversion providers.
Can the adviser confidently say that they were acting in the best interests of their client when they did not fully consider an important equity release product option? Would they have all the necessary documentation and information to be able to adequately fight a complaint from a client?
These are issues for all equity release advisers to confront but especially those who a) do not have permissions to advise on reversions and b) no longer consider them because of a long-standing assumption on their value.
We have all seen how quickly the equity release market can change and, given the current economic situation and developments in the housing market, particularly around house price inflation, reversion product criteria has the potential to be changed quite quickly.
As an adviser would you know if this was the case? Are you aware of the current reversion product situation anyway? Taking a break can recharge the batteries and set you up for the challenges ahead, however taking a break from a product sector could affect all of your future holiday plans.