Equity release is one of the few financial services products which can deliver life changing benefits to customers.
Just take a look at the case studies provided by equity release providers to see what a difference taking a lifetime mortgage can mean to some people. Whether it’s to provide the means to maintain their home or to release funds to enjoy in retirement, the needs for these products continue to grow.
On this basis there would appear to be a compelling reason for building societies to be involved in the provision of these products – after all, the mutuals are all about meeting the needs of their members with secure and trustworthy products and services.
A contentious issue
But there seems to be a major difference in opinion among building societies in their attitude towards the equity release market. Business strategies vary widely, suggesting a degree of indecision about equity release and its potential. Earlier this year, a society, on withdrawing from the market, famously said it was ‘fed up with flogging a dead horse’.
Some have said they are ‘taking a watching brief’, while others refer enquiries to specialists or provide funds for other lifetime mortgage lenders. Relatively few play an active part in the market by providing advice or acting as a plan provider.
So what’s behind such alternative views? Let’s take a look at the perceptions and issues which are likely to have influenced their thinking.
There is no disputing the fact that ill advised product design and mis-selling of equity release plans in the 1980s and 1990s destroyed a great deal of consumer confidence in product providers and intermediaries. This period tainted the industry and its reputation, although many initiatives over the last few years now mean the market has been reformed.
The formation of Safe Home Income Plans (SHIP), with its code of practice in particular, has created a framework which both drives and supports the right approach for customers. The long list of initiatives, which protect customers, include; mandatory qualifications for equity release advisers, an adviser checklist, best practise guidelines produced by the Council of Mortgage Lenders and adviser trade bodies, specially designed means-tested benefit software and full regulation of lifetime mortgages and home reversion plans by the Financial Services Authority.
Product providers now use consumer risk assessments and the principles of ‘Treating Customers Fairly’ to design and develop new plans which mitigate risks for the consumer. Strict selling practices using these guidelines are beginning to make a real impact in raising confidence, and SHIP records show that very few customer complaints now take place in the equity release market.
No big surprise
So equity release has changed. No longer the embarrassment of the financial industry but a sector poised to change the lives of people in a positive way. We are beginning to see this change in the number of enquiries and new equity release business. And why should this be a surprise?
People in the UK are living longer. They are living active and fulfilling retirements before looking to protect standards of living in their old age. They have benefited from incredible house price inflation, but perhaps haven’t built the pensions to help them achieve their ambitions.
Their attitude to families and inheritance, and, as importantly, the attitudes of their children to their parent’s retirement, are changing too. Families are being open with each other, understanding each other’s needs and unsurprisingly looking for financial solutions that help them all.
So what is important for those considering equity release?
- Confidence that their interest and the interest of their families comes first.
- Confidence in dealing with an organisation with a history for fairness and long-term value.
- Peace of mind that appropriate advice will be given even if the advice does not result in a sale.
- Certainty the product and service will be clearly explained so it can be easily understood.
- Confidence in knowing the product will be competitively priced, designed to offer fairness and guarantee to accommodate any future change in circumstances.
Which, of course, brings me nicely to building societies. Time and time again, building societies score well in customer surveys that deal with satisfaction, good value, customer service and trust.
Trust is the key
The secret to unlocking the potential that everyone can see in equity release is trust. Organisations that have it will flourish in the equity release market because the need is there. Building societies have a unique opportunity to step in and expand this market because they are able to differentiate their products and services to an extent which can be measured by the customer.
Perhaps the most compelling reason why building societies should enter the equity release market is because their members will increasingly need this type of product. In a growing segment which will become increasingly significant, what other organisation is in a better position to satisfy this demand?
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