Secrets and lies

Stuart Wilson

January 7, 2016

Stuart Wilson is marketing director at More 2 Life.

I was once the subject of an Official Secrets Act investigation carried out by MI5.

I could tell you all about it of course but then, as the saying goes, I’d have to kill you afterwards.

Not only that but I’d have to track you down first and I have neither the time nor – you’ll be pleased to hear – the inclination to do either.

As much as I would like to pretend otherwise (for the prestige and inevitable free drinks it would get me) the truth behind this story has more of the Bland than the Bond to it.

Nevertheless, there will no doubt forever be a small brown file in a vault in London somewhere with my name on it. Or the digital equivalent.

I wasn’t present at the meeting when the details of my life were poured over by the Men In Suits but I know from someone who was there that MI5 ask questions – a LOT of questions.

They had to consider every angle, every possibility to ensure I wasn’t a threat to national security. The very fact I am writing this I think can reassure you that I’m not. Honestly.

Asking questions is a cornerstone of financial planning and the advice process: know your client.

And like the spooks from the ministry, advisers meeting clients for the first time have to ask them a lot of questions – delving into every aspect and every corner of their lives to discover their goals, ambitions, their attitude to risk in order to make the most appropriate recommendations.

One area of a client’s life that can be overlooked, however, is their health.

For older clients, those of retirement age, health problems can be a gateway to enhanced terms.

But while the enhanced lifetime annuity market is well established and widely publicised, the enhanced lifetime mortgage market is rather less well known.

Enhanced terms on a lifetime mortgage – offered to those with existing medical conditions or lifestyle issues that could affect their life expectancy – can increase loan-to-values to as much as 55.5% (against a market average of about 34% for a typical equity release client).

So the transformational benefits of disclosing a chequered health history are obvious, but the number of clients receiving enhanced terms on their lifetime mortgage remains relatively small – perhaps only around one in every six cases sold based on our research.

So, given that asking questions is a natural part of an adviser’s interaction with clients, why does it appear that some clients are falling through the net and missing out on enhanced terms on their lifetime mortgage?

Perhaps it is not a case of the lack of questions, but a lack of the right questions.

Asking a typical 65 or 70-year-old client if they are healthy will probably get you a robust yes unless they are very obviously in less than perfect health.

With people living longer than ever before (average life expectancy for those aged 65 is now around 20 years or so and set to rise still further by the middle of this century), many are living with serious illness, too.

Common conditions like hypertension, type 2 diabetes and angina are often kept under control through regular medication so they can become ‘normal’ to someone who has been taking medication for several years.

But even serious illnesses can remain hidden without more probing questions.

We were recently contacted by a broker whose client told them they were in good health.

Only after delving further did we discover the client had been diagnosed with breast cancer about a year or so ago.

Treatment received and recovery well under way, the client now considered themselves to be healthy.

The broker didn’t appreciate the effect this could still have on a potential enhancement on their LTV.

Some clients may even intentionally hide health problems from their adviser.

Perhaps they might be embarrassed about disclosing these details, or they may feel the information will count against them and perhaps scupper their chances of getting a mortgage offer.

Believe it or not, some clients find the idea that a poor medical record can work in their favour – rather than end up costing them money – completely counter-intuitive.

This is why it’s so important to ask questions – lots of questions – when it comes to researching the optimal lifetime mortgage solution for your clients.

Making clients aware of the benefits to them in terms of a potentially higher loan or bigger facility through full disclosure is also key to offering more options.

And if you want to know the full story behind my brush with the establishment, then if we ever meet up just take the advice from this blog and ask me a lot a questions.

I might just spill the beans…maybe…but it will cost you a few drinks.

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