Sarah Davidson reports on the efforts being made across the industry to improve borrowing options for the silver-haired generation
Advice
There is a sticking point – perhaps the biggest of all. The financial services market has evolved in recent decades around products. Partly because of a historic focus on sales rather than on advice, regulation has approached the market in the same way and as a result, advisers tend to focus on one specific product area. Regulation and the permissions structure has entrenched this – to advise on equity release requires additional permissions and extra qualifications. To advise on pensions is another separate permission and to advise on regulated mortgages a third area. Given the size of these latter markets and the potential for increased liability, it is also reasonable to see why advisers choose to specialise. But it leaves the customer poorly served. Too often advisers rely on being a restricted adviser, forcing the client to find the right solution, about which they are likely to have no knowledge, if it falls outside their advisory remit.
“Changing this behaviour has been the holy grail for many years and for some reason it hasn’t happened,” says Smith, managing director of OneFamily Lifetime Mortgages. “I think historically, the lifetime mortgage sector has been too small, however this is now beginning to change and we need to continue with the message that advisers either need to approach advice more holistically, or they need to partner up with a complementary adviser to ensure that their client gets the best advice.”
Mark Lambert agrees. “Lifetime mortgages offer a real solution to many older borrowers and these are often overlooked by mortgage brokers. The industry needs to work together and offer a joined-up approach to lending, either by mortgage brokers becoming authorised for providing advice on lifetime mortgages or by referring to specialist advisers.
“If the industry is really putting the client at the heart of the advice they are giving they need to be considering all of the available options to the client, including lifetime mortgages.”
It is a view shared by Council of Mortgage Lenders director general Paul Smee. “At present, there is a very limited cohort of advisers who can cover residential and lifetime mortgages and investment advice. Advice is segmented due to different regulatory regimes, different types of adviser and different product heritage. The hand-off between different types of adviser dealing with different parts of the market can be clunky and discouraging for the customer.”
Anecdotal evidence collected by the CML suggests that this can partly be due to reluctance to hand over because of the disincentive of commissions going elsewhere, while in other cases it can be due to a lack of understanding between advisers of what their counterparts can offer and therefore, who would be the most appropriate referral.
Smee adds: “There could be a smoother process for consumers to understand the differences between them and, where appropriate, to transition between the two. Mortgage advice for older borrowers cannot be seen in isolation. Consideration must also be given to other sources of advice around pension income; provision for long term care; and the impacts on benefits and inheritance, for example. For many older people making borrowing decisions, lenders with advice permissions and intermediaries are often only one part of the picture, alongside legal and financial advice. No single band of advisers covers this span.”
