It’s worth looking into later life lending
Bob Hunt is chief executive of Paradigm Mortgage Services
Clearly when it comes to growth sectors in the mortgage market, there are few that look as ‘appetising’ as later life lending.
A cavalcade of determining factors appear to have joined together in order to make the demand for advice in this part of the market high, including demographic changes, pension freedoms, interest-only mortgage repayment, greater individual responsibility in areas such as long-term care, to name just a few.
In not so many words, those reaching or in retirement are much more likely to have mortgage debt to service, may need further loans to take them through retirement, and essentially will increasingly need to access the equity they have stored up in their properties in order to move smoothly through retirement.
Let’s make no bones about this – especially in advice terms – there is a far greater level of potential complication when it comes to those clients in later life than you are likely to encounter in the mainstream sector.
Of course, I recognise the complexities of arranging mortgages for the self-employed, or contractors, or those with multiple income sources who may have adverse credit in their background, but generally when you’re dealing with an older borrower you are having to take into account a greater number of wants and needs, not forgetting issues such as the state pension, benefits, inheritance tax, family concerns, care, existing living arrangements, etc, etc.
This is no easy order-taking experience for the adviser, and for that reason I tend to understand why some firms might not wish to dip their business toes into these potentially muddy waters.
However, when it comes to lucrative client types, and as mentioned, the growing demand for advice in this area, it would probably be remiss of you not to (at the very least) look at the options available to you.
For some, the step would be a natural one. They may already be offering later life mortgages to clients but – quite rightly – feel that they also need to be offering equity release as well in order to ensure the client has full access to all the options.
Securing the necessary authorisation and qualifications in order to do this should be relatively straightforward but, anyone embarking on such a path must remember that the equity release sector is different to the mainstream mortgage one.
For a start, there are plenty of sector developments to keep up with and products change constantly, plus there are considerations not just around lifetime mortgages and home reversions, but also other mortgages like the new retirement interest-only (RIO) offerings which are likely to grow in number, and of course many more lenders have upped their maximum ages when it comes to traditional loans.
This is not a sector where you can rest back on any initial knowledge learnt – it requires constant CPD and a constant appraisal of what is available and how criteria/pricing, etc, might change.
Therefore, some firms might feel that an introducer arrangement would be far more suitable for them. In this case, you need to work with a specialist firm that covers all the bases mentioned above, not just either/or when it comes to later life loans and equity release.
The options have grown so dramatically that there is the potential for regulatory action should the client feel they have been taken down the wrong route, so why not make sure they are seeing an adviser that can offer access to all the products that might be suitable for their needs.
Added to this sector complexity, is (as mentioned) the complexity of the client themselves.
One hates to use the word ‘vulnerable’ but it is a ‘badge’ that has been stuck on clients of a certain age, and one feels that the FCA in particular wants to keep this at the front of advisers’ minds when working in this space.
Of course, many later life clients are not vulnerable at all but some are, and the checks and balances – such as independent legal advice – are in place for a good reason.
It does however mean that advisers may have to take a different approach when dealing with such clients – the focus on quality soft skills is particularly relevant here.
All in all, the opportunities clearly outweigh the threats when it comes to the later life market – it is only going to grow and will increasingly need quality multi-sector advice.
Recent calls for a qualification that covers all areas are, in my view, justified as is the potential adviser shortage if more advisers don’t make themselves available.
However, with support from distributors like ourselves, and by taking advantage of the big support network around the later life market, there is every possibility to make such a transition a pain-free one and to make a considerable success of your work in this area.