The need for comprehensive conversations in considering all options
Product innovation in later life lending has been substantial and is very welcome but needs to be accompanied by quality advice for customers to benefit. Air’s recent National Later Life Lending Conference heard the results of analysis of data from Air’s Navigator tool on customer attitudes to making repayments - even if not doing so results in a higher cost of borrowing. Around 90% indicate they are willing to pay a higher cost of borrowing as long as they are not committed to fixed repayments.
This is perhaps not surprising given the drivers that will have brought many of these customers into the advice process, and the changing nature of income and affordability in later life.
But the road to success begins with comprehensive conversations and advisers must advise rather than order take and be prepared to challenge customer preconceptions towards repayments.
Data from Air’s WriteRoute journey shows 66% of customers have some disposable income and that 11% have disposable income of more than £2,000 each month. The data suggests the majority of customers have the ability to make some level of repayment and, whilst they might be reluctant to make a regular commitment, they will still be able to manage their cost of borrowing in a flexible way through ad hoc payments.
Supporting clients to make ad hoc repayments helps deliver good customer outcomes and is a major benefit offered by the industry, going that extra step to ensure a customer fully understands the benefit of committing to even a very moderate monthly payment can have a material impact on cost of borrowing.
Other challenges leave no room for complacency
Considering all options will remain vital in the market given the FCA’s ongoing focus on Consumer Duty. The FCA’s 2023 Advice Review is likely to be repeated and the sector must be able to demonstrate how it has listened and evolved.
In partnership with The Equity Release Council, and accredited by the London Institute of Banking and Finance (LIBF), earlier this year the Air Academy launched the Fact Find Learning Programme, to support best practice for adviser fact finds across the later life lending market.
Advisers need to equip themselves with the skills and knowledge to make best use of fact finds as part of the wider advice process. Central to best practice is the ongoing focus on vulnerable customers in a market where vulnerability will always be more prevalent than other areas of financial services. Too often advisers are missing indicators around things such as financial resilience and not exploring what bespoke interventions may be required to achieve a good outcome in these cases.
Alternative options to equity release and later life lending, including referrals to free debt advice services or care concierge providers, need appropriate consideration. Further research and in depth fact finding with a customer can often mean different advice and perhaps even signposting to a different adviser for the right support.
Above all there remains a need for monitoring of outcomes which is vital to enable firms to understand whether they are doing the right thing, as well to demonstrate that they are meeting Consumer Duty obligations. Later life lending advisers – and the market as a whole - need to know whether products and services are working as intended for the benefit of customers, and take action if they are not.
The later life lending market has evolved considerably. Our products and advice are transformational for many customers looking to lead a more comfortable or fulfilling later life.
The FCA’s discussion paper creates a moment in time opportunity for the sector to put forward it’s ideas on how we can remove barriers preventing many more customers accessing our products and services. However, as we engage with the regulator on a positive future vision for the market we must continue to focus on standards and delivering good outcomes for the customers we see each day.
