The Single Finance Guidance Body can join up retirement advice
Following the Single Finance Guidance Body (SFGB) stating its five calls to action on 15 November, Nici Audhlam-Gardiner (pictured), managing director of lifetime mortgages at OneFamily, writes about the role it can play in addressing emerging silos in the retirement planning and later life lending markets.
As we have all witnessed, the outlook for retirement has changed drastically over the last 20 years, both in terms of longevity, quality and priorities, but also the options to fund later life.
Whilst bringing innovation and new products to the market, these changes have created worrying disconnects in both retirement planning advice and in later life lending advice.
When providing advice on retirement planning, if an individual has a borrowing need, a pension shortfall or just a lack of savings in general, the advice is incomplete if it does not include options with regards to their housing wealth.
Over half of those aged 55 to 64 own their home outright, going up to seven out of 10 of those aged 65 to 74, equalling £2.8 trillion in equity according to Savills; and this is money that could provide a much-needed boost to older homeowners’ incomes.
However, the focus for retirement planning advisers is traditionally pensions, savings and investments, while housing wealth is not typically considered.
By acting as the first point of call for consumers, the Single Financial Guidance Body (SFGB) can signpost the important part their home can play in their retirement plans. This will in turn help to fulfil the SFGB’s ambition, to help more adults approaching retirement to understand enough about their options to make informed decisions.
The SFGB can also bring cohesion to advice in the later life lending market. Following the introduction of retirement interest-only (RIO) mortgages, later life lending advice has become fragmented: – RIO mortgages are mainstream mortgages, while equity release, which serves similar consumer needs, sits in specialist advice.
This is because the FCA does not require RIO mortgage advisers to be qualified in equity release. There is merely a requirement to signpost lifetime mortgages to a customer if they feel this could be a suitable alternative.
However, this is hard for advisers to do, given they do not advise on these products and will not necessarily have in-depth knowledge.
The result is that the same customer could end up with a different solution depending on which adviser type they choose, running the risk that an alternative outcome might have been better for their individual circumstances.
By signposting equity release as an option to older homeowners, the SFGB will help the customer to select the advice route that is more appropriate to their needs. Despite not providing actual advice they can inform consumers about the whole range of later life borrowing options available to them, creating a smoother onward journey.
The SFGB can help bring unity to what are otherwise disjointed areas of the advice market, which, if not addressed, could result in consumers ending up with the wrong solution for their needs.
Of course, the ultimate goal is to create truly joined-up advice covering all options – this is not an impossible goal when advising similar retirement lending products, but a much bigger challenge when trying to knit together the different skills and qualifications of mortgage and financial planning advisers.
So, the SFGB (or whatever it will be christened in future) can be assured of a role in signposting different solutions for retirement planning for some years to come.