"Any equity release adviser who has been working in this industry for even a short time can explain how clients’ needs and situations change case-by-case."
In financial services, and more specifically equity release, we have been labelling many of our customers as ‘vulnerable’ for quite some time. I understand the reasons behind this classification, but is there much truth behind it? Beyond the possible patronising connotations, how ‘vulnerable’ are our clients?
To understand why this label could be off the mark, we only need to look to the sheer number of elderly people who currently live in the U.K. Back in 2010, the Government put together a report entitled: ‘Key Issues for the New Parliament’. The report calculated that, ‘10 million people in the UK are over 65 years old’, and that, ‘latest projections are for 5½ million more elderly people in 20 years time and the number will have nearly doubled to around 19 million by 2050.’ So, we are talking about tens of millions of people. Surely, they can’t all be ‘vulnerable’?
The truth is that the elderly are just as varied as any other age cohort – some need help and some are more than fine. Any equity release adviser who has been working in this industry for even a short time can explain how clients’ needs and situations change case-by-case. One customer may want to use the money they release to go on holiday; another may want to spruce up their home with a new kitchen or conservatory; some may need to pay off an outstanding mortgage; and another may wish to give their children an early inheritance. With such variety, it’s clearly counterproductive, as well as inaccurate, to simply label equity release customers as ‘vulnerable’.
Beyond the fact that it is impossible to homogenise a group of tens of millions of people, there is also the simple truth than many people who fall into the 55 and over category are more than financially savvy and far from vulnerable. After all, the elderly control much of the wealth in this country, and some estimates put the total housing wealth of the over 65s at a whopping £1 trillion.
It is clearly incorrect, therefore, to deem all people over 55 ‘vulnerable’, as many continue to be financially adept throughout their lives and many are sitting on great sums of money. They should be trusted to take important decisions - like whether or not to take a lifetime mortgage – as after all, how would you feel if, after a lifetime of hard work and prudent saving, you were labelled as ‘vulnerable’? This is not to say they don’t need all the information to make an informed decision and fully understand the pros and the cons.
Also it’s not to say that there aren’t vulnerable customers out there. There are thousands. But as equity release has grown, evolved and adapted to the needs of customers, we have built in critical safeguards. These safeguards, like the ‘No Negative Equity Guarantee’ and compulsory advice, have gone a long way in protecting those clients who need protection. The good advisers who meet truly vulnerable clients are well aware of how they should approach the case, and time and again good advisers make it clear that other avenues should be explored.
Ultimately, the label ‘vulnerable’ seems to me to end up being a catch-all term that catches far too many people. By 2040, nearly one in four people in the UK (24.2%) will be aged 65 or over. And with many millions of these people desperately needing financial advice, I think we all need to work together to find better terminology and avoid generic labelling. As over the coming years, retirement finance will be the focus of much debate and argument, so understanding our clients is essential for all. There is vulnerability across every age group which is why financial education is essential and advice for more complicated products necessary.
