It’s hard to pick up a paper or turn on the television these days without seeing some sort of reference to ‘2012’, and the London Olympics.
For any adviser involved in the equity release market however, there should be a different four-figure number at the forefront of minds – ‘0108’. By 1 August 2007, advisers who sell equity release business need to have passed one of the recognised equity release examinations if they want to continue to recommend products provided by members of the equity release trade body, Safe Home Income Plans (SHIP).
That means there are less than six short months to the deadline – and the countdown clock is ticking.
Suitably qualified
This requirement follows an announcement by SHIP in June 2006 that it would insist all applications submitted to its member providers from 1 August 2007 – whether that be lifetime mortgages or home reversion applications – should come from suitably qualified advisers, whether they specialise in equity release as a major plank of their business strategy, or only deal with the odd case.
The Financial Services Authority (FSA) has also recognised the importance of qualifications for financial advisers intending to provide advice on equity release. 6 April sees the long-awaited regulation of home reversion plans and as a result of this, financial advisers must be suitably qualified within two years to provide advice. If new to the equity release market, this will require ‘grandfathering’ from a qualified adviser until such qualifications have been received. However for those already in the business, this is not a requirement. Although this isn’t a very prescriptive timescale, it is certainly a positive sign of the way the market appears to be maturing and a clear indication of the regulators attitude to advice on equity release products.
Encouraging start
The encouraging news is that over 6,000 people – a very healthy proportion of the market – have now passed a lifetime mortgage examination. This is an impressive number but there are still many advisers who work in this market who are yet to get qualified before ‘0108’ and run the risk of not being able to advise their clients in this area. Even if you are a financial adviser who is advising under the ‘grandfathering’ rules, SHIP members will require a signed declaration that by a qualified adviser before the application is processed.
The decision by the industry, which has been broadly welcomed by most, is designed to raise standards in an area of the financial services market that is generally recognised as needing a little more extra care and attention. If it improves the quality of advice and raises standards, this can only be a positive step for intermediaries and consumers alike.
Of course, no one likes doing exams – especially when the time and effort required for studying has to be balanced with a full-time job and other external commitments. But the 40 hours study time that the Chartered Insurance Institute estimates an adviser should set aside for study would seem to be a good long-term investment when measured against the potential business opportunities that it will bring.
On the evidence
All the evidence suggests the equity release market is likely to represent the best opportunity for growth in the UK financial services industry over the next decade or two.
More and more financial advisers are examining the options the market may afford them, recognising that it is a market where they can be seen to being adding real value to their clients in their financial planning.
The baby boomer generation is approaching retirement and they will be looking for the vehicles to help them fulfil the aspirations and plans they have for their leisure years. Equity release will be one such route, but if you’re not qualified you’ll be left out of this new and growing market.
As ‘0108’ gets ever nearer, there will be more and more reminders of the need to become qualified. Starting the route to qualification by mid-March would mean just two hours a week needing to be set aside for study – a small investment in time when measured against the potential rewards.
All media references to the ‘London 2012’ Olympics contain some sort of variation on the theme of ‘Will it be ready?’ For advisers thinking about equity release, the same question can be asked about ‘0108’. Will you be ready?
