RIO and equity release are overly siloed

Ryan Bembridge

November 8, 2018

There are concerns that some customers are being steered towards retirement interest-only mortgages, known as RIOs, or equity release without the other option being properly considered.

The Financial Conduct Authority started treating RIOs as a residential mortgage in March, resulting in a swell of new products from lenders including Leeds Building Society.

But three mortgage experts agreed that the later life industry currently has a challenge to overcome when it comes to ensuring customers get the right product for them.

Stuart Wilson, managing partner, Later Life Academy, said: “Currently if customers talk to an equity release adviser in many cases that’s what they’ll end up with.

“If they talk to a mortgage adviser they will probably get a RIO or an older residential product.

“What they may not come across is somebody with a bird’s eye view of all their circumstances.”

In the long run Wilson thinks the structure of exams need to be changed to achieve this bird’s eye view.

Currently there’s a separate qualification for equity release advisers.

Ray Boulger, senior technical manager of John Charcol, said: “There are regulatory barriers meaning in practice advisers can only advise on one or another.

“It is a problem. It’s one that advisers have the ability to change if they wish to because there’s nothing to stop an adviser who only does mainstream to do lifetime.”

Despite the challenges some firms are making strides. For example Key now has residential a team in a bid to close the advice gap between residential and equity release.

More 2 life’s corporate marketing director, coincidentally also named Stuart Wilson (pictured), said that advisers are finding ways to offer customers both.

He said: “In an ideal world advisers should be able to give advice across the board.

“I think IFA firms are recognising that their customers are talking to them about releasing equity – that is leading more advisers to taking examinations to talk about equity release.

“It’s fuelling greater demand for referral services. More and more advisers are referring their clients to specialists because they recognise that this is a tricky area.”

He said that the equity release market is relatively straightforward for new advisers compared to those going into residential.

He added: “I think mortgage brokers have a good grounding and will get to grips with equity release.”


Legal & General Home Finance plans to enter the RIO market, so there is clearly some convergence amongst providers on the cards.

Ray Boulger said: “There is absolutely no reason from a regulatory point of view why a lifetime mortgage lender shouldn’t go into the residential market.

“There are more challenges the other way round because of the way lifetime mortgages are funded, with the interest rollup.

“We’ve already seen some convergence and there’s no doubt that will increase.”

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