"It's far better to have the necessary protection and cover in place at the start of the process, rather than waiting too late and being unable to do anything at that point."
Given the customer demographic of ‘later life lending’ – the clue is in the title, so to speak – and, certainly historically around the equity release market in particular, there has always tended to be a focus, both regulatory and morally, on the potential for greater detriment and harm here.
This is because there is often a suggestion that just because we are dealing with older customers in this sector they are immediately more ‘vulnerable’ and could potentially be forced into products they don’t understand, want or need. I understand this concern, however I’m also conscious that the later life market may actually do more than any other sector to protect against this.
Indeed, if you look at a product area like equity release, there is much to suggest we have more checks and balances in place here to ensure potentially vulnerable customers are not taken down the wrong path, than perhaps anywhere else. I’m thinking specifically of the qualifications and authorisations required by advisers but also the separate legal advice that must be taken, and indeed the specialist nature of the solicitors who deal with such cases. In my experience, it is when individuals who have no understanding of equity release get involved that greater problems can occur.
However, I think we would also recognise that there may be a greater potential for vulnerability, certainly the older the client gets, although I would also suggest that I’ve encountered more vulnerable 25 than 70 year-olds, because of their lack of experience with financial services and in areas such as mortgages and loans, in particular. The vast majority of the clients later life advisers will deal with, will be sharp as a tack, completely understand the product and their responsibilities with it, and rather crucially, value the service they are being offered.
But, there can be situations which will only arise in this space and, to quote Liam Neeson in Taken, they require “a very specific skillset” which not all advisers have. I’ve often said that the biggest mistake advisers can make moving into the provision of later life advice is to think they can simply replicate what they’ve been doing in the residential market. You cannot sell equity release or later life lending products like you sell a residential mortgage market – in fact, if you are ‘selling’ then you’re already doing it wrong.
The vast majority of equity release products are now drawdown – which means that the customer, at different stages, can choose to draw down separate amounts from an overall pool of money available to them. However, as time moves on, what happens if the mental capabilities of that client diminish and they reach a point where they’re not deemed to be capable enough to make a decision to draw down that money, even if they really do need it?
Ordinarily, there would be a Legal Power of Attorney in place to make that decision, to ensure that the money available to them can be drawn down and the individual concerned can access the equity they have technically already released and now need. Good advisers ensure those potential issues are covered off so to ensure that, as a client does become more vulnerable, they are not punished doubly for something that is not their fault and is beyond their control.
It’s important matters like this that show how different our sector is, and it’s also why, for instance, we recently partnered with mental capacity and financial vulnerability assessors, TSF. They work with advisory firms and individual advisers to help them identify financial vulnerability and mental capacity issues in clients and how they might manifest themselves as time moves on. Having an assessment process in place for clients not only helps identify potential issues for the client but can also help the adviser in terms of the advice they provide now and in the future.
In this sector, we feel that’s vitally important and given the nationwide debate we currently have, and the importance of recognising, mental health issues and ensuring consumers are not entering into decisions they are not truly capable of making, then we believe it perhaps points the way for a solution that could be introduced right across financial services.
Not every client is vulnerable; not every older client is a higher-risk, but changes can occur – and they can occur quickly – so we believe it’s far better to have the necessary protection and cover in place at the start of the process, rather than waiting too late and being unable to do anything at that point. As advisers, we shouldn’t forget that we are not just helping our clients but we’re also helping their families and ourselves.