February 2008

Removing the stigma

Dear Editor,

Equity release can be a daunting subject for legal and financial professionals. The perception, rooted in the days prior to SHIP and FSA regulation, is often that these are complicated financial products aimed at vulnerable elderly clients.

Even with all the innovations in the equity release market a stigma remains. Recent negative media coverage of equity release including a high profile spot on ITV's Tonight Show only compounds fears. So if legal and financial advisers are scared of equity release, what chance is there for the consumer?

2007 was a mixed bag for equity release news. On the plus side there was the introduction of regulation into the reversion market and, at the end of the year, the appointment of SHIP's first director general in the shape of Andrea Rozario. Research from the Newcastle Building society showed that 45% of people would consider equity release for their retirement, and this means that the potential for equity release growth remains huge.

On the negative side, the same Newcastle Building Society research indicated that although nearly half of those surveyed were interested in equity release as an option, a very significant 25% of those had no idea where they should go for equity release advice. Consumer confidence in the property market is currently low due to the credit crunch, rising interest rates and the Northern Rock situation. Although this lack of confidence does not affect equity release in quite the same way as it affects the sale and purchase market, it is still a factor, especially when added to the negative publicity surrounding sale and rentback schemes, which the media has often incorrectly presented to the public as a type of equity release.

It's up to us - the equity release industry experts, both in the legal and financial advice fields - to ensure that the prospective equity release client knows where to go for help. After all, it's not just solicitors who are frightened by equity release; financial advisers need to decide whether they want to conduct equity release business or whether they want to use referral arrangements instead.

In a tough niche market operating under almost constant media scrutiny it is important for well informed experts to forge strong links, ensuring that potential clients know where to go for the right advice and efficient, consistent levels of service.

Clients who have decided upon equity release often want the funds released relatively quickly as they will more than likely have a specific requirement for the money, whether that be a holiday, home improvements or additional income to make life more comfortable. The opportunity is there for solicitors and financial advisers to raise their profiles in the field and to make this kind of work a priority.

It would be prudent for equity release advisers to maintain a record of specialist solicitors, knowing that independent legal advice is an essential requirement of any equity release plan and that the experienced, specialist solicitor is more likely to be familiar with equity release procedure and particular types of products.

Industry experts need to do all they can to increase consumer understanding. Solicitors should not be scared of equity release and should take the initiative to become experts in this growth area. Likewise, financial advisers would do well to forge strong links with specialist solicitors for the benefit of both themselves and their equity release customers.

Stuart Rathe
Equity Release Team Leader
Home Plus (a division of Lees Lloyd Whitley)