The equity release broker looked at Safe Home Income Plans’ (SHIPs) first quarter 2006 figures and found that while 36 per cent of equity release policies initiated through independent advisers were drawdown, only 2 per cent were sold directly by providers.
This, KRS said, was costing clients almost £5m a year extra in interest or £5,363 per plan over the first year, with clients who arranged their policy through the provider paying, on average, £30,231 extra over five years period than those who sought advice.
Dean Mirfin, business development director at KRS, commented: “We were very concerned when the SHIP figures revealed that the majority of customers who deal directly with providers are not being advised to use drawdown mortgages. While these products are not right for everyone, they can offer the potential for significant savings over the long term in the right circumstances.”
KRS put most of the blame on providers with direct-to-consumer sales not offering drawdown options and highlighted the importance of gaining independent advice when seeking an equity release policy.
Simon Chalk, mortgage planner at Mortgage Portfolio Services, said: “You never know what happens in each case but brokers always have the best interests of the client at heart. Obviously if securing an income is the prime factor, then a drawdown is the best option but otherwise if you want to refurbish or give a gift then a lump sum is best. However, I’ve found that often a combination can often suit and as intermediaries we have the tools to meet the client’s needs.
