Advisers should consider taking borrowers back through the advice process when they decide to draw down their lifetime mortgage, it was said at an industry conference.
Speaking on a panel at the Later Life Lending Event (LLLE) this week, Steve Humphries, proposition director for mortgages at Mortgage Advice Bureau (MAB), said that, historically, the later life sector had been “very transactional” and had to “get better at building longer-term strategies with customers”.
“Products are evolving and innovated every day, week, month at the moment… there are so many products that what’s right for a customer now may not be what’s right for them in 10 or five years’ time. So, if we look at longer term strategies and – dare I say it – annual reviews with customers, where we actually go back and review their needs, a standard mortgage might be okay for them, then they’ll need something else later on.
“As an industry, we need to get better at doing that and not worry about the right here and now,” he added.
Dan Osman, head of later life lending at UK Moneyman, suggested the sector could transition to a model similar to how independent financial advisers (IFAs) worked.
Humphries agreed, referring to new rules imposed on IFAs in 2012 that saw the way they operated “change drastically overnight”.
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At the time, the Financial Conduct Authority (FCA) introduced rules saying IFAs had to give unbiased advice and could no longer receive a commission but should agree on a fee with their client.
Humphries said there were initial concerns and worries about how it would affect an adviser’s income, but said it had ended up being a positive.
“Could we move to that kind of model? Possibly. It’s a big shift from proc fees and broker fees. I’m not saying we should, but could we? For the right customers who are willing to pay an ongoing fee for a proper annual review… it’s something we should consider,” Humphries said.
Chris Flowers, intermediary sales director at Royal London Equity Release, said one way of looking at this was through drawdowns and whether people need to be re-advised when they use the facility.
He added: “That’s something we take really seriously, we look at the borrowers who come back to us for a drawdown and a high percentage go back to the adviser just to get clarification.
“There’s this real bit of concern. Drawdowns are a great product, it allows customers to have that security, but a customer might take three or five years from the time of advice and when rates were low… but if the customer comes back now and that interest rate is probably now 5.5%, is that advice that was given at that point still relevant?”
Flowers said the lender was looking at the future of drawdowns, how they work and how to make the continuing advice process commercially viable for customers and advisers.
Humphries said he did not like that advisers took clients through the advice process, recommended taking a drawdown, then “five years later, they can come back and take that drawdown and we’ve not been involved in the process”. He said this should change.
Pat Oldham, equity release proposition director at LV, said if he were an adviser, the lack of clarity around the government’s social care policy would be a challenge, as it would be difficult to suggest saving or passing down wealth now that the new government had scrapped the £86,000 cap on care costs and it was unknown what would happen next.
