SOLLA News and Views

27 May 2022

Views: The importance of improving the standard of equity release advice

With demand in equity release at an all-time high and bigger sums being borrowed, it’s more important than ever consumers get the right advice. However, the overall quality of advice being given isn’t keeping up with demand; something not lost on the regulator, the Financial Conduct Authority (FCA).Simon Chalk cropped compressed

In this post, SOLLA advisory board member Simon Chalk shares his expert insight on the current situation and discusses how the SOLLA Later Life Lending Advice Standard (LLLAS) can help advisers improve the quality of advice they give. Simon, founder of award-winning equity release firm Laterlivingnow! and one of the UK’s leading later life lending experts, also provides context around the growing consumer interest in equity release.

There are a number of converging factors driving demand for equity release

Between 2015 and 2021, equity release demand shot up from 23,000 to 45,000 sales a year. Between January and April 2022, a total of £1.53bn was withdrawn from UK property, setting a new quarterly record, with the average first sum drawn-down standing at £94,215.

A number of factors are behind this growing consumer interest in later life borrowing, including:

  • Natural momentum: with people living longer, they increasingly need to support themselves for more years in retirement
  • Increased cost of living: pensions aren’t keeping pace, and retirees need to up their ‘income’ just to stand still
  • Greater confidence: post-lockdowns, people are able to do things they were putting on hold, from passing on wealth, to overseas holidays, and carrying out home improvements
  • Shifting attitudes: the younger generation of later-lifers, see property differently to the forebears. Rather than considering their home to be an automatic inheritance right for family, they want to leverage it, much like any other asset such as ISA portfolios, and pension funds

The type of person opting for later life borrowing is also changing. In general, customers used to turn to equity release almost out of necessity. In the past, the a-typical customer often had means-tested benefits and wanted to release equity just to meet the bills, or to slightly improve their living standards. It’s now moved upmarket, with many more new customers that may be considered to be fairly wealthy, but looking for different options to enhance their retirement, in a potentially tax-efficient manner.

The right advice is vital for equity release consumers

It’s imperative the financial advice we give consumers is right over the duration, and this is never truer than with equity release. Clients in this space are generally at a point in their lives where there’s no bouncing back from bad advice and they may not have enough years left to undo poor decisions made.

In this age group, we may also be working with more consumers who find themselves in vulnerable circumstances, and advisers need to have a solid understanding of how this affects the guidance they should be giving over the longer-term.

However, the overall quality of advice being given, isn’t keeping up with demand

In 2020, the FCA reviewed the later life lending advice space, uncovering several areas that needed improvement. The Regulator found advice wasn’t sufficiently personalised, with a ‘tick-box’ mentality all to evident. It also felt advisers weren’t doing enough to challenge customers’ assumptions.

Fast forward two years, and the FCA is again urging firms to do more to ensure they’re giving appropriate advice to their equity release clients. If it’s not satisfied standards are improving, it may step in again.

Despite its concerns, the FCA only requires advisers to hold an Appropriate Level 3 mortgage qualification. In my opinion, this minimum standard simply isn’t high enough. We’re advising people who might be drawing-down significant 6-figure sums from their property, yet advisers need a lower-level of qualification than others who advise on, say, a small 5-figure pension pot. So, as advisers, it’s in our hands to ensure advice standards improve, before it’s done for us.

With the LLLAS, advisers have the power to ensure consumers get the right advice

SOLLA’s LLLAS is the only higher attainment that actively aims to improve the quality of equity release advice being given. The standard focuses on consumers, helping advisers boost their knowledge where it’s most needed. This includes later life matters like estate planning and funding care, as well as helping advisers see how any potential changes in their clients’ future circumstances should have a bearing on the advice they give today.

The qualification also helps advisers improve their soft skills, which is vital when working with people who might take longer to digest and understand matters or may be in vulnerable circumstances.

SOLLA supports advisers throughout the process of undertaking the LLLAS, and afterwards too. Advisers have access to a range of invaluable resources, all designed to help you stay up-to-date and ahead of the curve.

By attaining the LLLAS, advisers can help raise the bar across the board for equity release advice. The standard also allows advisers to set themselves apart as specialists, ensuring consumers understand they can be confident in accessing trusted advice that could make all the difference in their future later life.

With reportedly several thousand advisers now operating in the marketplace, anything that differentiates you from your competition, clearly offers a commercial advantage, as well as reducing the risk of unintended consequences for your clients.

Find out more about the LLLAS

If you’d like to find out more about attaining the LLLAS, please go to: laterlifelendingstandard.co.uk or contact vanessa@societyoflaterlifeadvisers.co.uk