February 2008

Sound advice

Tell me about Newcastle Building Society's expanded equity release service?

We have offered an advisory service on lifetime mortgages for some time but we are now covering home reversion plans as well.

We extended the service in response to the regulation of home reversion plans in April 2007. It's taken a lot of hard work to get this far as we had to take a close look at the business and make sure that our processes were robust enough. Reputation is everything in this business and we had to make sure we had the resources and capability to offer a good solid service. We had to ensure that we could control risk, not only for our customers but for the business itself. Firstly we looked at how the business was structured and assessed how we would deliver training. We also looked at providing a panel solution which is supported by a whole of market service. The products on our panel are selected to deal with specific client needs. However, if the client has special requirements we will look at the whole market to find the best product for them. All of the providers on our panel are members of SHIP.

How long has Newcastle Building Society been involved in the equity release market?

We used to be a provider of equity release and we had our own lifetime mortgage product. We withdrew from the market in October 2004 when mortgage regulation came in as equity release at that point was not a core part of our business. However, we launched the advisory service in 2005. We recruited staff in July 2005 and then launched across our branch network towards the end of that year. The lead time gave us time to ensure we had the resources in place to deliver the service properly.

How do you engage with customers?

Customers can contact us in a variety of different ways. They can get information about us from our website or send an enquiry via the internet. We also have tele-advice services that people can call. Those would-be customers who live within our branch network area can go into any of our branches and arrange to talk to an adviser either in branch or in their home.

How did you deliver adequate training to your staff?

We are fortunate as the advisers we had had sold home reversions in the past. However, we still decided to go back to square one and start from the beginning. We have large training and compliance departments and have specialist trainers within these departments who can provide a lot of support. We started off by making sure that everyone passed the transitional HR1 paper with the Chartered Insurance Institute (CII) because we thought it was key to get everyone a certificate in equity release quickly.

We also had a lot of provider support in the form of product presentations and we had an external consultancy firm coming in to help out too. We had to rewrite our sales processes and documentation and assess them to ensure they were sufficiently robust. At the moment we have five advisers working within the equity release advice service but we are in the midst of recruiting at the moment so the numbers will increase. I'm hoping to have up to twelve advisers by the end of the year if things go well.

What have been your major challenges in developing this service?

The main challenge has been getting good people on board. It's recognised that one of the biggest barriers to the business growing is a lack of advisers with the right qualifications and experience. We're trying to address this by starting a development programme within the society for those who want to sit the equity release exams. The key is to make sure that everyone is on board at the start and we've had great support from our training and compliance departments. We are trying to educate the general public, staff and even management about the benefits of equity release. Equity release is not a quick sale and we have to make sure that everyone knows what they are talking about.

What kind of feedback have you had on the service?

It's still very early days but so far the feedback has been good and we've been getting high levels of referrals which I think is a very positive sign.

How do you see the market developing?

The market will continue to grow to fit society's changing dynamics. While many of today's pensioners are very debt averse, the next generation is much more consumer driven. There will be people coming into retirement who will find their situation unpleasant due to a lack of forward financial planning and will look to equity release as a solution. People are currently worried about the impact of the credit crunch but I think the equity release market will continue to do well. I think we will continue to see more product innovation in the future and I think there will be a growth in home reversion plans as people come to understand them a bit more. Equity release can have a real immediate impact of people's standard of living and as clients increasingly enter their retirement years with debt I think there will be a growing market for equity release.

John Digman
Head of Equity Release
Newcastle Building Society