The recent move by the Financial Conduct Authority (FCA) to consult on the equity release qualification for advisers has been received with mixed reviews from the industry. While it is good to see the FCA is listening to advisers and starting to address some of the issues in the lifetime lending market, we need to be careful and ensure that any changes either to regulation or adviser qualifications lead to better consumer outcomes and an even more professional marketplace.
This area has evolved from being somewhat niche into a specialist advice market and we need to raise awareness about retirement lending if we want the lifetime mortgages sector to grow. In order to achieve this goal, more advisers are required to enter this space, obtain the qualification and advise on equity release – or, at the very least, talk to their clients about retirement lending and then refer them on to a specialist advisory firm if they cannot deliver the advice themselves.
Retirement lending is a rapidly changing landscape and advisers working in this space need to have a wider view of the options available for their clients – and those options are expanding rapidly. We are seeing new lenders enter this space, along with further funding coming on board, which is enabling lenders to widen their product solutions and innovate.
This innovation is taking place both within the equity release market and also outside as high-street lenders adjust their terms for mainstream lending solutions to allow older borrowers to access mortgage loans.
We do not, however, want to see more advisers entering this space at the risk of diluting the level of professionalism in this sector. This is certainly not a market for ‘dabblers’ who will potentially undo the excellent standards that have been built up over the last quarter of a century.
The FCA is proposing two solutions to the problem – either creating a standalone equity release qualification, or giving advisers the chance to top up their existing pensions or investment qualifications. The ‘top-up’ solution seems to offer a quick and easy win for the industry but we also see potential for it leading to a rise in the aforementioned ‘dabblers’ – albeit well-meaning ones. On the other hand, the new stand-alone qualification appears to make sense – yet is this actually the wrong answer to the wrong question?
There are already approximately 8,000 equity release qualified advisers in the UK but only 1,000 of those are practising in this market – and only about a third of those are fully active. Qualifications therefore are clearly not a ‘silver bullet’ for providing more equity release advice.
So how does the industry engage or re-engage with these other 7,000 advisers? Why have they chosen to take the exam but not deliver the advice to their clients? Rather than ignoring those who are already qualified, we need to get to the bottom of why they are not advising on equity release.
We need a resolution that is in the best interest of the adviser, while also allowing us as an industry to maintain the high standards put in place by the Equity Release Council to ensure the best possible outcome for consumers.
How about a ‘retirement lending’ qualification?
As an industry we want to see an increase in adviser numbers in the equity release space, but perhaps we should be campaigning for a new ‘retirement lending’ qualification, so that advisers are qualified to speak on all areas of lending, not just equity release?
A qualification overhaul may therefore be required going forward, as this market evolves and expands to include, for example, a ‘Later Life Lending’ or ‘Retirement Lending’ exam to cover all forms of borrowing that an older client might want and need.
Addressing the issue of qualifications for advisers and how we attract more advisers into the equity release space is only part of the problem. The FCA also needs to look at how it defines the term ‘retirement lending’. Equity release should be part of retirement planning and should have been included when the pension freedoms were introduced. We need to modernise the current label, which will in turn help anchor the societal importance of this area.
We have both the supply and the demand for equity release, but not the adviser numbers needed to support the tripling of the market size, which is what we expect to happen by 2020 with lifetime mortgages hitting the £5bn mark. The lifetime mortgages market is on the cusp of a breakthrough, with more funding and lenders entering the market space – what it needs now is the advisers to help support this surge.
Stuart Wilson is channel marketing director at more 2 life