Bridgewater Equity Release survey, conducted by Northumbria University, looked at equity release advisers’ attitudes and experience of the sale and rent back (SRB) market.
The research results come just three months before full regulation of the SRB market on the 30th June 2010 and provides adviser viewpoints on various aspects of the market including regulation, client suitability and take-up, case management, commission levels, and attitudes to current market providers.
The vast majority of respondents (96%) were wholly in favour of full regulation of the SRB market; currently the market is subject to interim regulation of which 75% of advisers were aware.
Of the 131 advisers who responded, only 16% had a client who had already entered into an SRB plan. The vast majority (67%) of these advisers had not been involved with the client’s SRB plan so had not advised the client to take the SRB themselves. This may suggest these clients had gone direct to the providers without advice, perhaps as a result of seeing an advert in the paper. Those advisers who had been involved in the advice described their experience as predominantly satisfactory.
Around 34% of advisers had seen clients for whom an SRB plan would be suitable over the last 12 months which when taken together with the above results, suggests advisers have some issues with advising clients to take an SRB even though it was suitable.
Almost all those who responded to the survey (97%) advise on equity release products but only 24% are either ‘likely’ or ‘very likely’ to advise on SRB under full regulation. However, a further 39% said it was possible they would be active in the sector and 38% said they would be likely to advise if a ‘widely recognised financial services industry provider’ entered the market. This further suggests some caution by advisers but an awareness of a possible market.
Finally, the survey shows a mixed bag regarding attitudes to provider commissions. The greatest proportion (37%) of advisers deemed a provider commission rate of 1-2% to be an appropriate payment on completion of the SRB plan; while 23% said they would charge the customer a fee instead, possibly demonstrating a wider move to fee-charging generally.
Peter Welch, head of sales and distribution at Bridgewater Equity Release, said: “The results of this survey into adviser attitudes to sale and rent back provide an interesting insight into the depth of the current SRB market, the adviser’s place within it and future intentions. The results may suggest that clients have taken out these plans without advice so this is where regulation should benefit clients and it is clear that advisers are fully supportive of SRB regulation. However, it is likely that this regulatory change will make it increasingly important that consumers can access advice if needed, so the apparent adviser caution relating to this product may be concerning for those offering these products.
“Clearly, advisers are only seeing a small number of clients who are potentially suitable for such plans. This may suggest that, for most individuals, SRB is regarded as a product of last resort.
“Taking all this, and the fact that many advisers are also unsure of their future involvement with the sector going forward, it seems the market has a lot of work to do to change attitudes. This should sound familiar to the equity release market. Both equity release and SRB needs advisers in this area otherwise it risks individuals taking out these products when it is not appropriate and/or when more suitable product alternatives are available.
“It would also seem that many more advisers would consider entering or continuing in the sector if a more widely-known provider was active in the marketplace but this is only likely to happen if the market size is attractive and distribution as always is key. The current providers have work to do to gain adviser’s trust and it will be interesting to see how the full regulatory regime impacts going forward.”
