Equity release currently seems to be one of those hot topics which produces a steady stream of news and innovation for the mortgage journalist to digest. The impending advent of the results into the Financial Services Authority’s (FSA) mystery shopping exercise will surely further highlight this sector of the industry and everyone involved is waiting with bated breath to see what the regulator’s conclusions will be.
Whatever the FSA says this time around, there will be many intermediaries out there who will still be reluctant to get involved in the sector. The Association of Mortgage Intermediaries (AMI) aims to provide those that do with all the help they need.
Rob Griffiths, associate director at AMI, says: “Equity release is a big priority for AMI this year and we are making sure our members know what they are doing.”
One thing that the organisation has done is form an equity release working group to help make sure intermediaries are getting the right information and support when involved in the market. Within this group, the idea was mooted for an equity release trade body to represent brokers and other players involved.
A perfect scenario?
Stuart Wilson, managing director of the Equity Release Advisory Service (ERAS), explains: “Equity release is a specialist area that is growing and as more people want to give advice, they may look in from the outside and there is no one they can approach to deal with the issues they may have.
“The perfect scenario is a trade body. The industry is awash with representative groups, sticking their flag up in the air representing their interests. The first idea was to be a sister trade organisation of AMI as it has done a good job and it would follow the same format.”
However, the viability of such an organisation for what is still a relatively small section of the mortgage market is a bone of contention which raises many questions and issues.
Dean Mirfin, business development director of Key Retirement Solutions, says: “The market needs clear and accurate guidance but the real issue is where this guidance is going to come from? We have the working group so it’s not about having a trade body for the sake of it and also, how will it be paid for and who will run it?”
With the ever increasingly competitive mortgage market constantly squeezing brokers’ margins, would they be willing to fork out to belong to an association for equity release intermediaries when they already have the AMI working group?
Griffiths casts doubt and says: “If the working group achieves its objectives, you shouldn’t need a separate trade body. We do research for our members so they know what they need to do in terms of qualifications and risks so AMI is doing everything possible to help its members work in the equity release sector.”
A focal point
However, having a focal point for the equity release sector is one of the main arguments behind having a separate trade body and the industry seems widely agreed that it is a good idea in principle.
Mark Neal, managing director of Economic Lifestyle, comments: “There needs to be greater awareness among intermediaries dealing with elderly clients and they need to have the knowledge that they are selling the right product and, if a separate trade body helped with this, it would be a good idea.
“We are offering safe products but the industry is still full of independent companies so if they are bound together, they can concentrate on providing the best deal for the client.”
A trade body’s relationship with AMI and Safe Home Income Plans (SHIP) would be key, as the established organisations within the industry. While it is still only an idea at present, Jon King, chairman of SHIP, gave it a cautious welcome.
He comments: “Mortgage intermediaries need as much help as possible in dealing in equity release. AMI and the Association of Independent Financial Advisers (AIFA) are doing everything they can and I would support anything to help get more people into the industry.”
Combining factors
However, while as seems there would be some support for the idea, would it work in practice? Equity release is still very much an emerging market and it would take many factors combining to make it work.
Wilson says: “If the equity release market is to grow, representation seems to be important in helping it do that. However, it’s early days and there is not the critical mass to back it and it’s very expensive. It would be very bad if you put a rocket up announcing the formation of a trade body and six months down the line, it went under through lack of funds. That would be a setback for the industry.”
Therefore, it seems that we are still some way off from seeing an equity release trade body. As with anything in the mortgage industry, it needs to add value to be a worthwhile entity and, with AMI still fighting for brokers, and brokers respecting what AMI does for them, it seems a trade body doesn’t currently represent a viable concern for the equity release sector.
