July 17, 2013

Chris Prior is manager sales and distribution at Bridgewater Equity Release


Given that the target audience for equity release is older homeowners, the industry is acutely aware of the added responsibility it has when dealing with what some people regard as potentially vulnerable.

As a result of this, one of the commonly accepted practices that exists within the sector is that providers and brokers often encourage individuals to not only discuss any decisions with their families but, in many cases, invite them to accompany them to the meetings themselves. This is all part and parcel of making the process as transparent as possible, as well as ensuring that older homeowners are comfortable they are making the right choice.

At a recent round–table event we hosted for brokers wanting to share their experiences and learn more about equity release, some interesting conversations took place about the role of beneficiaries in the advice process.

One concern that emerged from around the table was whether beneficiaries have any grounds for comeback from a legal perspective if they feel that the client releasing equity has impacted on their inheritance.

While this is a legitimate concern and can prove to be a contentious issue when it comes to wills, it is not a valid complaint when it comes to equity release. The legal stance with accessing funds tied up in one’s home is that everything defers back to the client and it is their asset to do with as they wish.  

There then came the suggestion that beneficiaries could sign a letter saying they have understood that their parent/grandparent has taken out equity release.

Although a nice idea in principle, it was pointed out that legally it wouldn’t hold any water and clients shouldn’t feel compelled to justify their actions to potential beneficiaries in this way, any more then said beneficiaries should expect they are automatically entitled to their parents’ or grandparents’ properties.

In any case, it was felt it wasn’t often children that were the problem in most situations, but distant relatives who can seek ‘to make a claim’. Immediate offspring are usually encouraging, supportive and aware of why their parents may be wanting to release equity in the first place whereas extended family aren’t necessarily party to this information.   

Another issue worth bearing in mind is that while it is definitely worthwhile inviting family members to meetings, it is also imperative the adviser holds meetings without them in attendance in case the client is being coerced into equity release against their will.

This may sound like an unlikely scenario, but it is an eventuality worth considering when assessing suitability.

Just as some beneficiaries may not want their parents or grandparents to take out an equity release plan and potentially impact their inheritance, so others may be putting the pressure on to access the funds for themselves more immediately.  

All of this may make advisers slightly wary of what the best way to involve family members in the advice process is but in most cases it is a simple courtesy that is appreciated by all parties.

The possibilities I have presented here are extreme examples that most advisers will hopefully never encounter but it is worth highlighting them in order to provide food for thought.





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