Chris Prior is manager sales and distribution at Bridgewater Equity Release
How often do you get to speak to your peers? I ask the question because for many of the equity release advisers Bridgewater deal with, the whole process of giving advice can be a solitary experience.
Many firms in the sector are one-man bands with at the very most some additional administrative support.
Therefore, I always feel it is part of our remit and responsibility to bring advisers together to share their experiences of the market, talk about best advice and ask questions of various industry experts.
Our round table events have therefore become a big part of our yearly timetable and, given the response I have had from those who attend, we will be doing more of them in 2014.
The latest event was held at the offices of Equilaw in Gloucester and we had a full house of advisers along with experts such as Claire Barker of Equilaw, Gareth Morgan of Ferret, and yours truly.
I am always surprised at advisers’ willingness to share their experiences of the market and they are often very open about what can be quite sensitive areas.
One of those sensitive subjects was raised at the recent round table and it covered the issue of fees and who charges what.
I sensed a certain amount of reluctance on the part of some to detail their charging structures although many were willing to share.
As we went round the table and a similar level of fee was disclosed by most advisers I could see out of the corner of my eye one of our guests with his head in his hands.
The reason being that he had clearly come to realise he was charging far less than his peer group and was therefore missing out on a fairly large amount of income on each deal.
In terms of pricing the average amount charged tended to be £800-plus up to the £1k mark whereas the adviser I mentioned earlier was charging less than half this.
Of course there is nothing wrong with this type of charging structure but I would think it is hard to hear those in the same business valuing their work at a higher rate than you currently charge.
While I suspect the adviser will go away and look at what he currently asks clients to pay it is also an indication that there is no standard charging structure across the equity release advice market and every adviser comes to their own conclusion about their worth and the fees they charge, based upon their individual business plan.
What was also interesting was the discussion we had about the level of work that goes into an equity release application and the issue of not being paid should that application not make it through to completion.
I know for a fact that advisers spend many an hour working with a client, determining their needs, sourcing the right product, establishing the effect (if any) on benefits, and of course there is no guarantee that any product will be taken.
This work is completed in good faith however I see no reason why advisers shouldn’t be remunerated for the hours they put in.
Some of those round the table obviously agree and they put in work markers that if hit mean they will get paid for the work up until that time.
For example, one adviser puts in both their Initial Disclosure Document and the fee agreement that the client pays £195 when the application is put in and in many cases it is then deducted from the main fee charged on completion.
A case of strong Treating Customers Fairly I would think. Again, in the great scheme of things this doesn’t seem a large amount for the work up until that point however it does mean that some income is made for the work conducted.
This announcement certainly pricked up the ears of many around the table and I would imagine many will be putting in a similar structure from now on.
In the fee discussion we also discussed how advisers remunerate their introducers with most opting for a flat fee on completion.
It was interesting to hear that most do not add this on top of their fee but it’s paid out of the total amount which will make the income achieved per deal even smaller. Looking at the hours put in and the fee achieved it was hard not to come to the conclusion that many advisers are offering serious value for money.
A positive outcome for the client certainly however one wonders how sustainable this is in the long-term? Certainly for our adviser charging half that of his peer group it is unlikely to be a strategy he sticks to for much longer. In a very true sense, we were glad to be of service.