Equity Release Review

This was never going to be easy

Stuart Wilson

CEO, Air Group

‘E xpect the unexpected’ is a mantra you tend to hear a lot in business, along with the phrase, ‘fail to prepare, prepare to fail’.

These clichés are trotted out regularly and while I suppose there’s an element of truth to them, they don’t really cut the mustard when you come across a truly unexpected event, or a situation which seems impossible to prepare for.

Market downturns are a natural part of our existence in financial services, particularly in the housing and mortgage markets. Those of us who are long enough in the tooth are acutely aware of this, and it therefore pays to be ready for the next hit.

That said, few would have kicked off 2020 anticipating anything like the situation we now find ourselves in.

Even those who follow world events closely might not have been truly aware of what an outbreak of a particular virus in Wuhan, China would eventually mean first globally, and then specifically in terms of the health of our nation and our economy.

For those who did anticipate what followed, I salute you for being far and away ahead of the curve on this one. Yet I suspect whatever you did to prepare, apart from perhaps ensuring that your business had as much cash in reserve as possible, would never have 100% protected you against the lockdown, what it has meant for our sector and our ability to provide advice, and the impact it would have on lenders and providers.

In that sense, we’ve had to be reactive to what has happened, and from an equity release sector point of view, I couldn’t be more proud of the efforts that have been made to keep business flowing, keep on advising clients and maintain the quality of advice standards that are required by our regulators and trade associations.

It was never going to be easy, particularly given the reliance on faceto-face advice with clients, not just from a financial perspective but also for ensuring independent legal advice.

To that end, the Equity Release Council (ERC) moved incredibly quickly to temporarily revise its rules about face-to-face meetings with solicitors, acknowledging that without a change there would be no hope of getting cases through. Our providers were also able to make some rapid changes to criteria requirements, perhaps most notably in the area of valuations, where the lockdown has – for the most part – put a temporary stop to physical valuations.

Normally, in-person valuations are a highly important part of the lending process, but we have now shifted to a situation where (at the time of writing) almost all equity release providers are accepting either desktop or semiautomated valuations.

That constitutes a major step change over the past few weeks, and is a rapidly introduced amendment from providers which will allow equity release business to continue to be

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written, rather than us looking down the barrel of a stalled marketplace throughout the entire, indefinite lockdown period.

It’s this ability to react quickly that is hopefully allowing advisers to continue working with clients, providing advice, and placing cases.

Communication across the piece has been absolutely key, whether it’s advisers continuing to converse regularly with their clients, organisations like ourselves offering information and support via our coronavirus hub and updating our sourcing system quickly, or providers similarly offering a range of resources, whether specifically work-related, or more general insights into how to work remotely during this period.

There’s also been a recognition of what advisers are currently going through in terms of potential cashflow issues, coupled with the continued need to have access to the best commercial terms and the very latest information.

We’ve been fortunate to work with two academy ambassador firms, Canada Life and more2life, which have agreed to cover the membership fees of all our advisory academy member firms during the lockdown period. While the cost of these fees is not going to make or break an advisory firm, it’s important we do all we can to help.

This is another example of equity release stakeholders all working together in order to keep activity levels up, and to ensure that consumers continue to have access to high quality advice in this area.

It’s impossible to predict what might happen next, but in our reactions to this crisis we can definitely ensure the best possible advice environment right now. We can also do whatever we can to get back to normality quicker, while providing advisers with everything they need to hit the ground running as soon as the lockdown is relaxed.

I think we all appreciate that this is going to be a longer haul than some might have initially anticipated, but the later life lending sector is showing resilience in the face of adversity, and we will continue to work together to support all stakeholders.

Maintaining standards in challenging times

Claire Barker

managing director, Equilaw

As the rising tide of coronavirus cases continues to impact on social and economic conditions around the world, a climate of uncertainty has taken root at the heart of public life.

Most events of global significance can be measured in terms of a specific root cause or combination of factors, invariably political or economic. Yet COVID-19 defies conventional categorisation. It can only be defined in terms of its unpredictability, singularity and potential for future damage – a Black Swan event, as many commentators have described it.

Previous pandemics have demonstrated an almost limitless capacity for economic and social upheaval, with recessions or downturns proving a near-certainty. However, careful analysis of these events can also help policymakers to identify measures needed to minimise longterm economic damage and to protect population health – a sort of warning from history.

The last pandemic of truly global proportions, and the event closest to mirroring current circumstances, was the Spanish Flu pandemic of 1918-19. This accounted for at least 20 million fatalities over an 18-month period, as well as catastrophic declines in manufacturing, consumer spending and business activity.

This led to significant financial reverses around the world, with a 6% decrease in UK GDP, and comparable difficulties in the US.

However, recent research has established that US cities which implemented stringent social distancing measures at an early stage experienced far lower mortality rates and far stronger economic performances once the pandemic subsided.

POSITIVE GROWTH

Analysis of post-1919 economic conditions has also suggested that any future downturn is likely to be short-lived (representing a sharp V as opposed to an extended U). Economists predict a brief, though undoubtedly severe, recession in the short-term and the possibility of positive growth emerging in the last quarter of the year, depending on containment and quarantine, financial stimulus from the government, and low or even negative interest rates to support spending measures. So, the outlook may not be as bleak as some would have us believe.

Nevertheless, as the value of pensions, savings and other investments continue to fall prey to the vicissitudes of the stock market, and mainstream finance options begin to falter, the need for UK retirees to establish dependable sources of income or offer financial support for family members has become a matter of grave urgency.

Many financial experts believe that the equity release (ER) sector is uniquely placed to help older customers meet their financial obligations, offering flexibility and choice that could prove crucial to those who are reliant on equity wealth. Moreover, with many mainstream mortgage lenders choosing to suspend applications or to impose caps on borrowing, experts predict that demand for ER products will continue to grow exponentially over the coming months. Some lenders (such as more2life) are already prioritising video conferences and laptop valuations to keep customers on top of transactions.

Anecdotal evidence has already suggested a dramatic upsurge in the number of financial advisers taking

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ER qualifications (primarily, it seems, to remain competitive), while research by the comparison website Over50schoices.co.uk has discovered that consumer interest in ER products has remained buoyant, albeit tempered by understandable hesitation.

Consumer confidence, a fragile commodity at the best of times, appears to be undaunted by current events.

However, for many in the sector, ER is about more than just financial gain. The industry has taken a great deal of pride in the standards and safeguards introduced over the years to protect customers. It is the ability to transform people’s lives for the better, while ensuring that applications are underpinned by a robust and impartial legal process, that remains at the heart of everything we do.

To this end, the industry has worked hard to ensure that standards of service and protection are maintained throughout the crisis, and that existing safeguards are strengthened to counter the growing risk of wrongdoing.

As the number of people losing their jobs continues to rise across the UK, the potential for fraud, duress or coercion of vulnerable customers is likely to intensify. The Equity Release Council (ERC) has sought to pre-empt this by consulting with members on possible changes to its standards.

These changes allow for a temporary modification regarding the necessity for face-to-face legal advice, and to ensure that customers are offered the same level of protection and advice remotely.

A potential stumbling block is the requirement for deeds to be physically witnessed by a legal professional; we are currently waiting to see if lenders will accept a scenario involving nonlegally qualified witnesses.

If they choose not to, we could see a distinct lack of lending in the near future and the possibility of the sector grinding to a halt; something that nobody wants to happen.

There can be little doubt that, given the chance, equity release could play a major role in mitigating the economic effects of the COVID-19 crisis, providing a lifeline for many thousands of vulnerable people.

A genuine force for good.

Collaboration and communication

Alice Watson

head of marketing and communications, Canada Life

Over the last few weeks, coronavirus has signifi cantly impacted our day-to-day lives, and this is no diff erent when it comes to the workplace.

With many offi ces now closed and all non-essential travel restricted, for those of us without a home offi ce, kitchen tables are quickly becoming the norm.

It’s really important we take collective responsibility for how well we work together so we can focus on building better futures for our colleagues, customers and advisers.

Working in a virtual team can be productive, but it’s an adjustment, so establishing a routine is crucial.

Simple measures such as agreeing start and end times, getting dressed for work, reducing distractions and taking regular breaks will help you focus.

Communication and visibility are also key. We all appreciate seeing a friendly face, and tools such as Zoom are making this possible, allowing not only co-workers to check in, but advisers to provide support and reassurance to their clients.

While the majority of advisers are already embracing technology, they should also think about how well their current relationship management tools are supporting customers’ needs.

As lenders, we’re working extremely hard to ensure we’re keeping advisers, and ultimately their clients, up to speed with changes to processes and existing products as a result of the rapidly changing environment. Not only does this include adviser communications, but dedicated information hubs where

they can fi nd up-to-date information.

We mustn’t forget, however, that there are plenty of opportunities to be found in times of crisis. For example, some lenders have introduced remote valuations to allow them to progress applications during this period.

With more time to learn, many lenders, Canada Life included, are creating engaging webinar content for the adviser community, giving them the chance to learn about current market changes, as well as helping them improve their knowledge and understanding of the sector.

The situation presents some challenges for the later life lending market, but it’s important to look to the future and focus on opportunities. At times like this, collaboration is vital, and it’s been great to see the equity release industry pulling together and embracing technology to deliver solutions for advisers and their clients. M I