Master Later Life Lending - By Air
The "Master Later Life Lending" podcast is designed specifically for equity release specialists and mainstream mortgage advisors who serve clients over the age of 50. Hosted by industry veteran Paul Glynn, our mission is to equip you with the knowledge and tools needed to excel in the dynamic world of later life lending.
Each episode features in-depth discussions with leading experts, focusing on the unique financial needs of older borrowers. We tackle key issues such as dispelling myths around equity release, exploring the latest product innovations, and understanding the regulatory changes that impact your practice.
Our goal is to empower you to provide the best advice and solutions to your clients, whether they are traditional equity release customers or emerging younger later life borrowers. By staying ahead of market trends and enhancing your expertise, you can build trust with your clients and grow your advisory practice.
Join us on this journey to mastering later life lending, and ensure you’re equipped to meet the evolving needs of your clients. Subscribe now to stay informed, inspired, and ahead in this crucial segment of financial services.
Master Later Life Lending - By Air
Beyond Traditional Mortgages: Smarter Lending Strategies for Over-50s Clients
In this episode of Master Later Life Lending, host Will is joined by industry experts Stephanie Charman (AMI), Kate Davies (IMLA), and Kelly Melville Kelly (ERC) to explore how financial advisers can offer truly holistic advice to over-50s clients.
Together, they unpack key topics including evolving regulations like Consumer Duty, the broadening range of borrowing options, tackling industry silos, and ensuring fair value. With insight into market shifts, product innovations, and client-centric strategies, this episode is essential listening for advisers who want to stay ahead in the changing later life lending landscape.
Welcome to Master Later Life Lending, the podcast where I explore the latest trends, challenges and opportunities in the later life lending market. I'm your host, will, and whether you're an equity release specialist or a mainstream mortgage advisor, this show is designed to help you stay ahead of the curve as you navigate the unique needs of older clients. In this episode, we're asking the question are you considering every option for your over 50s clients? We explore the critical steps financial advisors must take to ensure they're offering the most comprehensive and effective advice for their over 50s clients in later life lending. Joined by experts Steph Charman from Aimee, kate Davies from Imbla and Kelly Melville-Kelly from the ERC, we discuss how the latest regulatory and market shifts are shaping the options available to these clients. You'll gain insights into how to navigate the complex changes, expand your service offerings and boost client outcomes by considering all possible borrowing solutions.
Speaker 1:Whether you're an experienced advisor or new to the field, this episode will empower you to provide truly holistic advice and stay ahead of the curve in later life lending. So let's get started. So let's get straight into it. First question I'm going to come to you, kelly, on this one to start with. So, with over 50s clients having an increasingly diverse range of circumstances and situations. How can advisors take a truly holistic approach to ensure that every possible solution is considered when providing advice.
Speaker 2:I think that that's interesting because I don't think any advisor can truly be a specialist in everything. It's just not possible. There's too many variations across the full mortgage spectrum. But what they do have to know is what the alternatives are and what other options are available without just thinking of their own silo. And I think the best way to do that is by really thorough fact finding. It's about really getting to know the customer, getting to know the circumstances, getting to know whether or not they have surplus income circumstances. Getting to know whether or not they have surplus income. And those sort of really in-depth knowledge of the customer will open up other potential options, such as, in our case, whether or not it's something in the standard mortgage market, if it's something in the later life lending space. But only by really getting to know your customer are you able to do those. But I'm not saying for one minute that somebody needs to be able to advise on all of those. They just need to have a knowledge and be able to refer off if they need to.
Speaker 1:Thanks, kelly. I certainly agree with that. I think, steph, throwing that over to you, I think you know consumer duty has probably changed the world slightly. In terms of that, focus on overall good outcomes, irrespective of the scope of advice that you provide, and the recent dco letter to mortgage intermediaries talked about the need to consider all options. So, in the context of what kelly has said, what would be, I suppose, your advice for mainstream mortgage advisors sort of operating in this part of the market?
Speaker 3:yeah, I would. I agree with what kelly's just said. I don't think any advice mainstream advisor starts out or the other way. Actually any sort of specialist equity release advisor starts out trying to fit square peg round hole. So I think they're all focused on that customer outcome.
Speaker 3:I do think it's around education to make sure you are fully aware of all the other solutions available and that can be difficult. To make sure that you are assessing that. But really getting into the core of, as Kelly said, the core of what the client's needs. But really getting into the core of, as Kelly said, the core of what the clients need, the client's circumstances, and making sure they're clear on their understanding to meet the consumer duty, they're clear on their understanding of all those potential solutions that are available. I think you know we've talked around, you know how can they step into different areas. And Kelly touched on referrals and I think that's really important having that. I talk about a referral ecosystem because it works both ways. It's not just mainstream into specialists, it's specialists into mainstream. I think having that ecosystem in place is really important so you recognise where there's a need, you identify that and if it's not in your scope of service, your scope of advice. That's also fine as long as you find that, but you refer accordingly.
Speaker 1:And, steph, you and I have talked before. You define that, but you refer accordingly, and, steph, you and I have talked before. But there's parts of the market where that potentially works quite well at the moment. I mean bridging or second charge or or even some sort of protection models, sort of work on referral models, don't they? So are there learnings we can take from other parts of the market?
Speaker 3:I think, be open to open to referrals. I think, yeah, we do see it in other, in other spaces, and I think you know we'll come on to talk a little bit later on about silos and I think I've got a really good analogy for that. I'll wait to speak about that then. But I do think we do see it across specialist areas and I think you know, I think we all use the GP analogy quite a lot, don't we? Other conditions that you may need to look at and other things you need to just to to consider and then refer accordingly. You wouldn't expect your gp to start operating on your knee, um, in the middle of an appointment.
Speaker 1:So it's quite okay to say this is my scope of service, but I recognize you've got a need here and I'll refer you to a specialist to support you no, that that makes absolute sense and and, kate, I suppose you know, looking at it from a lender perspective, we've seen a lot of sort of product development in this space sort of over the last few years. So I suppose it's really important, given that you know potentially the differences between lifetime mortgages and RIOs and TOs and even sort of mainstream products. Extending into later life means that advisors do need to take that more holistic approach. Would you agree with that?
Speaker 4:They do. They need to know a lot about the different products that are available. But it also really strikes me listening to Kelly and Steph just now, the challenge for intermediaries and the thing they are so good at is really understanding what the customer wants and what the customer's motivation is for taking out this particular product. Is it to increase a little bit of income? Is it to release some cash to give to the kids? To have deposits to buy their own place? Is it for debt consolidation? Is it to do that round-the-world cruise?
Speaker 4:Whatever it is, I think the more the intermediary understands about where the customer's coming from, the better place they'll be to point them in the direction of a really suitable product. And that might be equity release, it might be Rio, it might be bridging or second charge. If it's maybe short term, there might be some income coming in down the line which could pay off a loan. It depends whether we're talking short term, long term, medium term planning, whether the customer really knows where they're coming from and what information they may have had already. They may have been talking to some mates, they may have been told that this product might be good for them and that's why they've come to see this particular broker to discuss that. But actually there may be other options they're not aware of. So for the broker, putting the customer first, really, and then looking at the drawer behind or the shelf behind it, all the different products that might be there, that might be suitable.
Speaker 1:And Kelly, that must align to sort of how thinking has evolved at the Equity Release Council as well and potentially how sort of standards have evolved and maybe some of the work you've been doing on sort of fact find learning programs. I think that idea of comprehensive conversations, sort of underpinning the fact find and make sure that advice is customer centric first and foremost. You know it has to be sort of where the focus is. So I suppose how to how to advisors sort of blend that need between keeping that real sort of customer focus rather than just adopting a sort of tick box approach to to achieving compliance I think that comes back to to previous point.
Speaker 2:It's really getting to know the customer and understanding what Kate said. What is it they're ultimately after? And they shouldn't be order takers either. So it's not someone walking in and saying my mate got down the pub, got an equity release and I want one of those, that doesn't cut it. It's really sitting down, understanding that what the customer really requires, what their circumstances are, and then looking at what best alternatives are there.
Speaker 2:And I think over the last couple of years we've seen that go beyond.
Speaker 2:We might have seen a couple of years ago pre-consumer duty having a conversation about alternatives, but none of that was documented or customers' own words.
Speaker 2:So I think where we've seen consumer duty really come in is advisors that have had these conversations previously but perhaps weren't good at documenting it and really spelling out for the customer what the alternatives are.
Speaker 2:So I think you're right. I think we're saying that there's not necessarily tick box but absolutely making sure that conversations are recorded and evidenced more than what they ever were previously, that conversations are recorded and evidenced more than what they ever were previously, and that's definitely the way our standards have went. I mean last year we put in it that it was mandatory to do income and expenditure and I know probably Kate and Steph will look at me and go really, you know that's such a big part of standard mortgages but it wasn't for equity release. And then, moving forward, this time around we're really trying to embed that whole alternatives, making sure that there is that referral model in place I love the word ecosystem, steph, so I'm going to nick that one and just making sure that if there's alternatives in place for a customer, you are referring them to the best person that can consider that without worrying that you're losing a sale because it's not about a sale. It's about a right outcome for a customer.
Speaker 1:And Steph just building on that. So that idea of the importance of advice rather than order taking, I mean that can be quite a difficult sort of cultural change for an advisor, can't it? Because, particularly when you've got a customer sitting in front of you who thinks they know exactly what they want, I mean mainstream mortgage advisors must find that, in the same way as lifetime mortgage advisors do as well.
Speaker 3:Without a doubt I think Kate touched on you know the mates down the pub, I think, are fantastic mortgage advisors, aren't they? Or so they appear to be, and I think you know I use a phrase that a customer may believe they know what they want, but an advisor knows what they need and I think it is that tailored, personalised recommendation that really you know, and if you do all of that, you should meet your compliance requirements. So I think you know it is about just breaking it down, breaking it really getting to the nub of I think we're just, you know, sort of covering the same point what actually what the customer really does want, short term and future. So it's always be that consideration to the future, but actually short to medium term, what are their needs, are you meeting, and what's your recommendation to to to suit that?
Speaker 1:and and kate, you know we've we've talked previously but the importance as part of that recommendation, of the customer understanding clearly what they're getting in terms of the products, what, what do you use on that and how advisors can maybe go that extra step to ensure customer understanding it's.
Speaker 4:It's an extension of what we've just been saying. It's not just know what the customer thinks the short-term and long-term needs are, but I think there also needs to be a discussion about the what-ifs. Um, okay, mrs buggins, you know we'll. Mr mrs buggins, we're going to talk about this kind of product for the next 10, 15 years. What happens in the next 20 years, when there's maybe only Mrs Buggins left and income may be even more modest or you may have different living requirements? Where will the family be?
Speaker 4:We need to look to the future, to when there may just be one part of the couple left or whoever. They need to think about what could happen in the future, what might happen to the property if it's an equity release loan. Do they really understand how the maths work out? Because I have seen this, both looking at complaints over the years from families who thought their parents had entered into agreements not understanding how it really worked out, to someone quite recently who I was talking to, whose mother had taken out a loan and didn't understand how compound interest works and I've had a discussion with Equity Release Council about that. I think it really needs to be shown, absolutely, you know, to have the figures there as an illustration.
Speaker 4:This is how it works. This is what the loan is going to look like, not in two years' time. Three years' time it doesn't look like two, but 20 years' time the figures look quite frightening. Years time doesn't look like too bad. 20 years time the figures look quite frightening. And I don't think enough people do understand that, and they're people are reluctant to admit what they don't understand. Um, and it's that takes a big skill from from an intermediary, to see the fear in the eyes and think, um, you didn't quite get that, did you, mrs boggins? Can it come? Can?
Speaker 4:we go through that again, or are you quite clear about that? Are you happy with that? Do you realize it's going to cost you this or the house might be worth that? Um, and then play it back and see how much they can. Can, uh, tell you what you've just told them, um, and make it really crystal clear um, it's, it's that. That is a real challenge and I've always said, with equity release and longer term loans, they have to to be future. Proofed. What could possibly go wrong? Because things can go wrong and things will go wrong. But the more you can build in the confidence that someone understood from the outset, knows what could happen and maybe has some room for maneuver.
Speaker 1:I think that point around compound interest, particularly when you're dealing, obviously, with lifetime mortgages, is critical, and I've certainly seen some very good practices from AIR members in terms of using borrowing forecast calculators to illustrate very clearly to a customer the impact of that. But I think, also because of the innovation we've seen in product design, they can be quite useful in helping customers understand the benefit of making some level of repayments to mitigate the impact of compound interest. I think, kelly, again, that's been quite a big focus, hasn't it? From the equity release cap. I mean, kate makes a really strong point there. So you know what more can we do as a sector to help on that customer understanding piece?
Speaker 2:Yeah, on that particular point, we're adding an extra point into our roles and checklist, specifically on Kate's area that she raised, just around the compound interest and how it's been explained to a customer.
Speaker 2:But you're right, we have seen massive product innovation, but I think the customer understanding point is even wider than just compound interest Because if you think of all of the three-letter acronyms and you know guiltware ERCs, ercs, apr you think of all of the jar-letter acronyms and you know guilt ERCs, ercs, apr you think of all of the jargon that we deal with and we take for granted every single day. But trying to break some of that jargon down for customers that perhaps only have a numeracy level of a 10-year-old, and I think we need to go further to explain things in much simpler terms, and that's definitely something I really want to get behind, especially on the numeracy side. I know there's been a lot of work on the literacy side over the last couple of years and making things a lot simpler in terms of literacy, but I think, especially in our sector in the mortgage wider sector we need to do more about the whole numeracy piece and explaining numbers to customers so that they really understand it.
Speaker 4:Do you think, the scope for doing more as the loan goes along? Because, especially with lifetime mortgages, the discussion takes place and the deal is done and the customers may be in their mid-60s, mid-70s, something like that. Or fully compos mentis and all the rest of it, or fully compos mentis and all the rest of it. Roll forward 10, 15 years and the world's getting more complicated. There may be a little less capacity to understand. Yes, the files are there, the paperwork is there. They could get them out and dust them off and try and recall what they signed up to and what the deal was all about. But is it all a bit too difficult at that stage? The details of the deal won't have, the arrangement, the loan won't have changed, but it's maybe harder to grasp at that stage. Um, I, I've got no sense of whether there is still a relationship really between the, the lender, or the, or the, the broker, and and the customer, someone else to go back to and explain in in really really simple terms.
Speaker 1:well, this is, this is how it's working out and this is how it's going, and to reassure people a bit, and also their families, if they've got people helping them at that stage- I mean I can certainly sort of point to some really good practice I've seen in that space where lenders and advisors will work in close collaboration so that if a customer does respond, for example, to an annual statement being sent out and has got questions about their loan or their options or what to do, a lender will often work very closely with a trusted advisor, even if the original advisor is not still in play, to ensure that the customer gets the support they need.
Speaker 1:But I think you're right, kate, I think some of that could be maybe sort of formalized a little bit more, but I think it does happen. And again, I do think there's a recognition that these are the sort of clues with the name on the tin, isn't it? They're lifetime mortgages and therefore the customer sort of support processes have to be in place to ensure that they're getting a good outcome throughout the loan and not just at that point of the original sale. But again, kelly, is it something that the Equity Release Council have sort of thought about and considered in terms of how best practice applies in this space?
Speaker 2:Yeah, and I think one of the areas here is also about the information sharing between lender and advisor, because very often you have advisors that don't know what happens post-sale. So customers may come back to the lender and do a drawdown quicker than they expected or there might have been a death or there might have been a big change in circumstances and very often the advisor doesn't know. So the tech forums definitely doing a lot of work about starting to share information. We've started to see some really good examples of one lender in particular does a health check on request, whereby an advisor firm can get access to all of the cases that has went through and if anything's happened with them.
Speaker 2:But I think there's a big onus on advisors here. I think it's about the relationship that the advisor has ongoing with the customer and making sure it's not a one and done sale. Making sure they pick up the phone to them on an annual basis and just saying how's it going? Any changing circumstances? Do you need me to do anything or remind you about anything, so that they always remember to go to the advisor in the first instance rather than to the lender. And I think if more advisors did that there would be less confusion further down the line.
Speaker 1:Well, we might come back to that maybe later in the discussion when we talk about sort of remuneration structures and how they can maybe align better to support exactly the sort of customer engagement model that you've discussed, kelly. So hold that thought everyone. We'll come back to that in a minute. But I wanted to turn to Steph and you made the comment earlier around silos and I think that's a theme I'd like to explore a bit.
Speaker 1:I think a lot of us sort of operating sort of in the market sort of worry about the silos that currently exist, not just between sort of mainstream mortgage advice and later life lending advice, but also more broadly across sort of wealth and generalist ifa advice and and mortgage advice or specifically later life lending. So my question is really sort of what are the barriers to that prevent those silos be being broken down, whether that be so, the regulatory rule book and how that's currently designed the trade body constructs. Can I be as sort of bold as to to say that, you know, does the presence of an equity release council reinforce a silo rather than than help break it down? And and what does the industry, what could the industry do to to try and address their problem of silos?
Speaker 3:okay. So, first off, I'll say we need to stop talking about silos and we need to address the fact that there are this perceived silos. So actually let's take some action. Um, I think also, we've spent an awful long time and I know we've had these conversations for many, many years actually well, so we need to stop talking as well, um, about this.
Speaker 3:You, you know this ultimate advisor who you know operates in wealth and more mainstream mortgage and, and, and, and, and. Well, that would be a very, very busy person. So that's we're chasing a unicorn. That's just not going to happen. So I think we need to put that one-to-one. My first overview. We need to put that one-to-one side and actually work out how do we make this market function, and I think there are analogies of where we see we touched on sort of referral ecosystems earlier. I think you know, amy are working in, you know, much closer collaboration with the Equity Release Council. So it doesn't need to be that we're at odds with each other. It's actually about how do we collaborate together to actually make sure that actually, you know, we have got that more sort of holistic approach, and I think we've seen analogies that we talked about an analogy and the one that I like to use is in buy to. You know, use mainstream advice and buy to let Advisors are very clear around where their boundaries are. So a mortgage advisor is very clear around because the landlord wants to arrange a buy to let loan and they know that they can't give tax advice on whether that should be done in personal name or a limited company or SPV. So they would signpost and refer them to either to the back of their accountant or as tax specialists, et cetera, and once they've received that advice in that space they can then come back to the mortgage advisor and whatever the recommendation is to move forward, they'll do it on that basis. So there are pockets of other parts of the sector that we could learn from and look at and go okay, so the customer journey works well there. How do we replicate that here?
Speaker 3:I think for me it's about better understanding of all the solutions that are available, and I think we touched on that already.
Speaker 3:Kelly talked around around that that's, that's difficult but can be done, but we just got to put the customer at the heart of that, you know. I mean that customer centric approach is key, not just to the product that you may be recommending or the solutions you might be identifying, but also just to the journey, because what we don't want is a customer to just bounce around different advisors and, you know, just not, just not still. That could also be a poor outcome. They might get the product they want at the end or the product they need at the end, but actually their whole journey has just been full of friction and that's not a good outcome either. So I think we need to look at, put the customer at the heart of it and actually let's map out what works well. As I said about the beginning, no advisor wants to not get the right end consumer. What we need to do is stop talking about silos and break the walls down and start giving some things a go.
Speaker 1:I couldn't agree more. I think customers certainly, coming into the process, they don't understand or recognize the silos and what we've got to do, in my view, is make sure that we remove this lottery, that the outcome that a particular customer gets depends very much on where they decide to engage in the industry to start with. You know we should have more consistency in terms of the outcomes that are being delivered. So, kelly, with that in mind, sort of what's the view of the Equity Release Council, of the Equity Release Council? Is it sort of aligned with Steph in terms of the opportunity is to industrialise the sort of referral process, or do we have an objective to create sort of more holistic advisors who are dealing with sort of more of later life lending alongside mainstream mortgages, as an example?
Speaker 2:No, I agree with Steph. I think asking any advisor to do all of that, you're looking for a robot rather than a person. I think I heard yesterday there's 700 different types of lifetime mortgage on the market at the minute. You add that into the many, many thousands that are right there in the standard mortgage market. No one can know all of those and what nuances and trying to work. That's just too much.
Speaker 2:I think Steph's point about putting the customer at the heart of it is absolutely right and I think we need to forget product. I think we need to take the product out of it and forget if it's later life or if it's this or if it's that, and just actually be completely product agnostic and look at the customer circumstances, which then leads through to potential solutions for them. But what we really want to look at is making sure that property wealth is included in all discussions. It's included with pension advisors, with tax advisors, with someone coming into later life or someone starting out as a first-time buyer. It's the role of property wealth needs to be discussed across the board.
Speaker 1:Well, that aligns very well with Nicol Rathi's comments in the JP Morgan Symposium, doesn't it sort of 10 days ago, about the need for property wealth to be considered. But, Kate, my question to you would be does the structure of the regulatory rulebook and the way that the regulator expects the market to operate does that sort of prevent some of the barriers being broken down in the way that sort of steph and kelly have outlined what should be our asks of the regulator to change the environment?
Speaker 4:I don't think it needs to cause a problem. Um it, it reflects if the, the structure is there for lots of different reasons and it's part of a jigsaw and I think the jigsaw will remain in place. The skill for advisors and lenders is going to be making sure that there is knowledge and the ability to refer, and I love Steph's analogy of having GPs and specialists. If I want to have a hip replacement, I don't want to go to someone who does cataracts, I want someone who does hip replacements all day, every day, and does a brilliant job all week. Um, so I want my advisor to my gp to say you want to go and see this guy because he's the best, or this woman because she's the best? Um, the regulatory rule book emerged the way it did because the uh regulator took the view that its mortgage rules had to focus on the mainstream to start with, and then actually the equity release rules very largely replicate what's in mainstream, but with a few extra tweaks added.
Speaker 4:There are two essential differences, I think, which help to drive that. One is funding, because lifetime mortgages are funded in a very different way from mainstream mortgages and that means a lot of mainstream lenders can't do lifetime and the regulator has in the past said it doesn't want certain types of lender doing lifetime because it doesn't think they can fund them long term sustainably. So that's one area that is likely to persist. I can't see that changing anytime soon. And the second one is training, because with the sort of background you need to sell a lifetime mortgage, you do need to jump through different hoops and learn different things and different skills.
Speaker 4:So there are different qualifications for mainstream advisors and lifetime advisors and I know there's been a lot of discussion about whether they should both do a bit of both. It's too much. You can never be an expert in both. We've been saying that for the last 20 minutes or so and we shouldn't try to go down that route. It's too much for one person to do. And in the early days, long before the MCOB rules came in, the regulator was saying they didn't want people dabbling in lifetime mortgages. That was the expression they used. Don't dabble in something. Don't do one hip replacement a month. Do five a day. Make sure this is something you're an expert in and you know a lot about the market. So the regulatory system, the system that underpins qualifications they are different for good reasons, but that shouldn't be a barrier necessarily to giving customers the right advice. If the key person, the advisor who has that face-to-face discussion with the customer, does their job and susses out what's needed and where then to refer that person and how much advice to give them.
Speaker 1:But is there at least an argument and maybe I'll direct this to both you, kate first, and then to Steph but is there at least an argument to say that some of the themes that emerged from MMR back in what 2014 are maybe no longer appropriate? And I mean, I would suggest that sort of MMR almost had an underlying assumption that people would be paying off their mortgage in their 50s or certainly before retirement, and that later life lending, or equity release more specifically, was a product of sort of last resort. Now the stats that I'm seeing coming out of UK Finance and others suggest that probably about over 40% of mortgages now are going to extend beyond people's retirement. So isn't later life lending a more sort of normalized part of someone's mortgage journey and therefore don't we need the regulator to be more explicit in acknowledging that?
Speaker 4:yeah, I see where you're coming from. Um. I suppose regulation is often a bit behind the curve, um, the rules are made because they're looking back at what has happened to date, um, and don't always look forward. I think the world has changed. Affordability has became more difficult for lots of people.
Speaker 4:We know there's a lot more people who are relying on fairly modest pension income, people needing to work for longer, people having more complex work lives and family lives, more blended families, more divorce, more relationship breakdown, more people buying much later in life and then having to support children, and so on and so on and so on.
Speaker 4:So there are lots of reasons why people will want to have mortgages for longer, and maybe also partly a change of mindset from some borrowers and the younger generation coming through, who are more likely to lease their cars, lease their phones, rent their houses, and they see nothing wrong with that.
Speaker 4:So they might want to rent for longer and they see nothing wrong with that. Um, so they might want to rent for longer and they might see they might see taking out a lifetime mortgage and never actually paying it off? Um as being a perfectly valid way of funding the place that you live in. Um, so the regulator has to be, uh, aware of that and responsive to it quite how it changes its rules. I'm I'm not sure I'd have to think very hard about that, certainly being open to giving more guidance to the different products that are available, but they will want to look very closely at all those products and, as I say, want to future-proof them and look at what has happened in the past and what could go wrong in the future and make sure they're happy that consumers will be protected.
Speaker 1:So Steph Kate paints a picture there, which I absolutely agree with a, of a quite a complex and challenging situation for many clients. I suppose that sort of really creates an opportunity for advisors and really sort of highlights the need for good quality advice in this space, doesn't it?
Speaker 3:without, without a doubt and I think that was one thing that that can't happen from a an equity release or lifetime perspective is that has to go through an advice sale. I think that should never, ever change. And I think to pick up on kate's point, in your point around, you know, I think there is a different in my mind. There is a real clear differential between a mortgage that goes into later life and a mortgage taken in later life, and I think that's perhaps, maybe that's the definition and maybe that's the piece. So, yes, you're right, you know we are seeing first time buyers now at age 35, 36, depending on the report that you read taking 35, even 40 year terms to stretch their affordability, to be able to step onto the property ladder there. But that will naturally just take those people into later life.
Speaker 3:But if they've got a repayment mortgage and that's tapering down towards the end of that time and potentially should be, you know, will have been revisited many times over that 40-year term, should have been caveat, should have been revisited over that 40-year term. Actually, you'd like to think it wouldn't get to that point. So is there a definite? I think back to my point. Is there a definition differential between into as opposed to in. You know, 65, 70 taking new money.
Speaker 1:No, I think that's a really good point and I think again we should stress that all customer situations are different, I think, and you know, one customer's needs can be very different from another. So again, it all comes down to personalised advice.
Speaker 3:Personalised, tailored recommendation.
Speaker 1:Across the whole sort of lifetime of a mortgage, I think not just at later life. So no, definitely Just moving us on slightly, Kelly, I'm going to come to you At the risk of this question being quickly out of date. We're seeing still a lot of turmoil in the sort of geopolitical environment at the moment and guilt yields are moving up and down and we're seeing sort of some product providers appetite around, sort of the asset class sort of changing day to day depending on the sort of market conditions. What would be sort of your advice to advisors in this space at the moment or indeed to customers looking to take out sort of lifetime mortgages, given given the market environment that we're in?
Speaker 2:I think we've had a couple of years now of of unstable and I think a lot of advisors and customers have been waiting to get back to the two percent mortgages, um, or or the 1.99s that was out there, and I don't think that's going to happen. I think we're in a new norm. I think everyone breathed a couple of days ago when guilt rates started to come down a bit and they've quickly come back up again. So I've checked this morning and they're back over five. So it's changing hour by hour at the minute with what's happening in the markets.
Speaker 2:But I think it's a case of looking at the here and now for your customer. It's looking at what's right for the customer now, because if you've got a customer in debt, for example, they might be exasperating their credit cards and putting more debt on their credit cards rather than looking at a mortgage solution. And if you're looking at a customer in debt, you're looking at a mortgage. You could be exasperated by waiting. So look at the here and now. But I don't think we're going to see any massive drops anytime soon. I don't think we're going to get back to the 2%, at least for some time.
Speaker 1:And, steph, I mean this is no different than been happening in the mainstream market for, as Kelly said, a couple of years. But it's a pretty stressful time for advisors, isn't it? Having to try and sort of stay abreast of all the different changes in interest rates and product criteria. I mean, what's amy doing to sort of support advisors in this current climate?
Speaker 3:so I think, yeah, I think it is around. You know, I think it's exactly what kelly said. Actually, advisors have got really good at this um. We've been operating this environment since a um september budget um by a previous pm. I think that's where they leave it there. So we've been operating in this environment for quite a long period of time and I think advisors have got really good at they don't have crystal balls. Wouldn't it be lovely if we all did and we could predict the future? But we don't.
Speaker 3:So you have to give advice based on what we know today and you know what is the customer aware of that? And also sort of just guide the customer to you. If they want to wait, that's fine, but the recommendation is that could get you know. I mean, I could get worse, it might not get better.
Speaker 3:I think the days of you know, I'd like to think customers really recognize now that the days of 199 or you know, at one point we had a two-year 0.89 in the mainstream market. Those days are gone. Happy days. I didn't have one of those. I had something not far off that um, so you know. So payment shock is, you know, is still, is still there and going to be received. So, from an amy perspective, I think it's just about continuing to issue that guidance on, and be very, very clear on, advise on the customer circumstances, the needs today and what you are aware of today. It's time post what could I mean? What the future may hold, but again, it's if a two-year fix or a lifetime mortgage or whatever that is meets their needs and the requirements now and they can afford it now, then that needs to be your recommendation and kate, you've already pointed out that the funding models um across the later life are quite different depending on product type between later life mortgages and maybe more conventional mortgages.
Speaker 1:But but how are lenders sort of thinking about this environment and what can lenders do, I suppose, to ease the pressure a little bit on advisors and customers?
Speaker 4:Hands up. I don't know enough about how the later life lenders go about funding the products. I believe they lock into the funding at the beginning, at the outset of a particular loan, so that they will not really have any flex to offer a break point or a bit of revision a few years down the line. If they could, that might be very helpful. I don't know how practical that could be for lenders. You tie up maybe the first five, six years. Well, a certain person is in the White House or whatever. Things might look better 10 years down the line you might be able to refinance. I don't know how practical that would be. If that degree of flexibility could be built in, that could be helpful.
Speaker 1:I mean Kelly can come in. But we've actually seen a lot of innovation in that space recently with the lifetime mortgage. So there's actually products available now with zero ERCs so you can re-break them at any point penalty free. And we've also seen a lot of products evolve away from guilt-based ERCs to fixed ERCs, so the customer knows at outset maybe within five, seven, 10 years, that they'll be able to remortgage without any penalties. So I think we are seeing much more flexibility and, kelly, that is something, again, the ERC have been sort of pushing for, isn't it?
Speaker 2:Again, it's that whole customer understanding piece and understanding at what point their options are. But you're right, we've seen huge innovations. We've seen a lot of seven-year ERC periods, five-year and, as Will said, last year we saw the emergence of the very first zero ERC product.
Speaker 4:Yeah, the other ERC Wednesday Equity Release Council, not an early repayment contract, Josh, yeah, the other ERC one's the Equity Release Council, not an early repayment charge.
Speaker 3:Yeah, it's confusing, isn't it?
Speaker 1:even for us.
Speaker 4:But so it's not something we talk about in IMLA. We mostly have mainstream members in membership and we can't talk about pricing anyway. But if you do have products which have no early repayment charges, are they more expensive than the ones that don't at the moment? Is there a differentiation?
Speaker 1:yeah, so that's another thing to take into account depending on the age of your borrower, perhaps exactly the headline price would be slightly more expensive than a product that you've got to pay for it somewhere exactly, and that's where it comes down to, to advice and, you know, making sure that the right products, uh, advise for the right customer.
Speaker 1:But but but I think actually that conversation leads us on sort of quite neatly, to one of those sort of elephants in the room that I did say we would come back to, and that's remuneration.
Speaker 1:And I say, whilst we want to get away from the conversation on silos, I think it's really clear that the procuration fees that are attached to different types of products in the later life lending space, lifetime mortgages versus RIOs, tos, mainstream products are very different.
Speaker 1:There's good reasons for that historically and I'm sure myself and Kelly would argue for the merits of some of those products, given how some of the sort of advice has developed. But I think it is one of those things that does cause the silos to be reinforced and also is potentially a barrier, kate, to what you talked about in the need for ongoing advice through these products, if all of the remuneration is paid at outset. So I'll throw it over to Kelly initially. But, kelly, sort of, what's your view on this current sort of level of prop fees paid in the market and how can advisors, particularly in the light of consumer duty be current sort of level of prop fees paid in the market and how can advisors, particularly in the light of consumer duty, be comfortable with the level of procuration fees that they're receiving on these products, particularly when they're very different from some of the other products that customers may be eligible for?
Speaker 2:I think it all comes down to the advisor getting their value assessment done right.
Speaker 2:I think they absolutely have to make sure that the service and product that the customer gets is proportionate to what they're paying. And so you're right, they are higher and there's reasons for why the prop fee is higher in this space. However, the advisor has to make sure that they're then not added on top of that with huge advisor charges, especially if it's a small loan. So where I would always challenge advisors is if they're getting a proc fee and then charging a high advisor charge but the customer only wants a small £15,000, proportionately, it could actually eat into a lot of what they're taking. So I think there's a huge piece for advisors to look at in terms of transparency to customers, making sure the customer fully understands exactly what fees and charges are involved, what they're getting for it and how it compares and do that analysis and to be able to justify it. But I am really keen to start talking about that ongoing drip and and making sure that customers get that ongoing service that I know is is there in the pension space steph, what about from your side?
Speaker 1:do you see the differences as being problematic?
Speaker 3:yes, but only one way. So I think what you do, that well there is a perception of okay. So whether it's reality, I mean so there is a perception of that we don't see as many referrals from a specialist back into mainstream because of this population fee differential and the charging structure that sits underneath that. So I think that is definitely a barrier potentially for the silos. Now, whether that's perception or reality, one for, I think, for for us as a collaborative, to get into. So I think there's definitely a piece there.
Speaker 3:I think I totally agree with kelly around fair value assessments and having a really rigorous fair value assessment. There is lots of support and help out there. Amy have got fact sheets that can help you, help advisors with their fair value, you know, adopt their fair value assessments and the charging structures that sit behind that. The transparency is, without a doubt, absolutely key and actually you know you can have different charging structures, I mean for different product sets as well. I think there's a perception that you can't actually you can have different charging structures for different product sets, but again, you've got to be able to evidence that and the regulator, if they came in, would want to see the work you've done behind the scenes to get to that calculation. So, as I said, amy's got fact sheets on it. A lot of the service providers have got tools that you can actually use to input your business costs and actually sort of help you get to an end figure of what could potentially look right.
Speaker 3:But if you are getting a higher procuration fee, that does all need to be fed in. I fed in, I think you know we are at the moment waiting for, I mean, I tend to be on time of filming an output of the appeal to the Supreme Court on what's going on in motor finance and that's around disclosure of commission, and I think that you know we don't know where that will go. We'd like to hope that in the mortgage space, you know, we are quite clear on disclosure. However, I think there will be some read across and I think we should, we should be mindful of that. So actually let's not wait for, you know, decisions out of Supreme Court. Let's just make sure that we're really transparent, we're disclosing everything that sits within you know sort of procuration fee structures.
Speaker 1:And I know that's something we've touched on previously, but that transparency and customer consent something the industry needs to think really carefully about on the back of the car finance if, if mainstream and lifetime mortgage lenders have been doing things by the book and doing things clearly, then they should be okay on this.
Speaker 4:But there may be some who might be feeling their collars a bit and having a look at their documentation to see that they are absolutely clear and I think there is an onus on the later life market to be even clearer, because the customers are getting older by definition and although things might have been crystal clear when they took the loan out, they may become less clear as time goes by and people will need a little bit more help from family, friends, solicitors, advisors, whoever it might be just to make sure that things are still on track and they haven't lost the plot and things are working as they should do, so that the more that can be done to, to, to do an annual assessment or an annual report or ask if questions are needed, so that the customer can say well, actually I don't quite get this anymore, but I'd like my daughter to come and help me, or I'd like to ask my man of my, my solicitor or somebody, um, then that could only be a good thing.
Speaker 4:We wait to see what happens on the motor finance thing. I personally I think most of the mortgage market should be okay because there's so much documentation, there are so many things which are explained to customers. Um, with lifetime they get independent legal advice through the equity release council rules, um. So there should be opportunities for somebody else to say actually, actually look, this doesn't quite look right. Do you realise it's going to cost you that? Do you think you know? Let's have a think about this? So there should be clear consent and there should be transparency. But keeping things documented is absolutely vital. We've seen in the past with various mis-selling problems, whether it was pensions endowments now Motor Finance Commission. If it wasn't written down, it didn't happen. It now motor finance commission if it wasn't written down.
Speaker 4:It didn't happen.
Speaker 3:There's the regulator's basic mantra, it seems, so people have to be very careful to cover their backsides I would say I would agree with that document accordingly, and actually, I think, if you are stepping into this sort of specialist arena, just make sure that, from a compliance perspective, you, you know, a slightly more sort of in-depth compliance service may may be required, or whether that's in-house or you look at external, external providers that can offer that. I definitely think that's, you know, an area that advisors should consider good points made, made by everyone.
Speaker 1:my personal view on on the remuneration side is that I do think there's a perception issue which which we need to face into, but but I think we can't divorce the question on remuneration levels from the broader ecosystem conversation. I think the way that customers are acquired in the later life lending space is very different than the mainstream space and I think there are differences on cost to serve. So both of those areas could be addressed with broader changes to the ecosystem and the processes. So if we can do that and then consider remuneration in the round, I think we can get to a better place. So one to be continued, I think. So we're coming towards the end of our session today, but I just wanted to ask sort of one final question and offer you the chance to make any closing remarks. But if we look ahead for the next, say, 12, 24 months, what's the one thing that you'd like to see in terms of a change in the later life lending market? And I'm going to throw that initially to Kelly.
Speaker 2:The change Gosh. I think I've mentioned it already. I would like all advisors to be considering property wealth regardless of a product. So get away from the product. And I'd really like to see advisors do a really cracking job with fact finds and looking at alternatives and building up those referral ecosystems that staff had. So it's not necessarily breaking down the silos, it's actually embracing and the the wider mortgage proposition and what can come with it super thanks, kelly and kate.
Speaker 1:Turning to you, what would be your sort of one, one ask of the market or the regulator or advisors generally? What would make the most difference? Do you think to positively impacting this market?
Speaker 4:It's a really tough one. Maybe even more innovation. Looking at what we've got, what works, what more can be done, I really don't know how to answer that one. Let me have a think about it. Steph got a good idea.
Speaker 3:Steph on your side about it. You know, steph got a good idea. Steph on your side, do you know what? I'd like to say? That if we were to sit here in 12 months time, I quite like doing this, actually put myself on the spot. But if we were to sit here again in 12 months time, we have already I've spoken about let's, let's talk more action, let's start to make some steps. So that's the piece that I'd like to see. So I think we are collaborative, but I think we can get better. So actually, how do we collaborate better? How do we actually sit down and say, right, what is that? What is the customer journey and where does those? Where does that referral piece sit? Because I think you know to your point.
Speaker 3:I agree with what you were saying about remuneration. So actually, let's get back to, let's put the customer at the heart of it and actually say what is the right journeys for them. I think, think innovation on product. I think there's Kelly you touched on I can't remember the figures 700. We're there. I think we're there in product innovation. Let's not expand it too much further. I don't disagree with Kate, but let's not expand it too much further, make it more complicated. Maybe there's actually a rationalization on it, actually more than an expansion. But actually let's sit down, look at the customer journey and start to to actually make some progress. I think it's probably. I'm not saying we haven't, but let's make some further progress.
Speaker 4:Maybe it's as much about image as anything else. Um, we've said there's a, there's a a feeling out there that uh, people don't necessarily get pushed towards, uh, mainstream products when actually they've gone to see a lifetime broker. They want to feel that that they're not being channeled down a route that's maybe not the best route for them. There is a little bit of an image of it's a last resort for some people and it may well be for some people who have got interest only loans that they can't repay, and it's absolutely the right thing for them to do.
Speaker 4:There have been, in some parts of the press, been some negative comments about about lifetime not being a good product for lots of people. That's a big hurdle to overcome. I know the Equity Release Council is working very hard to overcome it, but perhaps if we could see in 24 months' time, an improvement in the perception of the product and the whole later life market as being actually a really healthy market and a well-functioning and a well-regulated market, that would be a plus. And never mind how many products there are, the fact that there are good products out there, they're being well sold, the people who buy them are happy with them and understand them. That would be a big tick.
Speaker 1:It took me a while to get there. What a good way to close. So I think it just falls upon me to say thank you very much to all of you for your time today. That was a really comprehensive conversation, dare I say, and I look forward to maybe Steph coming back in 12 months time and seeing how the market.
Speaker 3:All of us back in 12 months time.
Speaker 1:Not just me. Thank you very much for your time Pleasure. Thank you. Thank you for listening to the Master Later Life Lending Podcast. If you've enjoyed our comprehensive conversations, then please take a moment to leave a review on the app or your favoured podcast platform. Make sure to subscribe, too, so you never miss an episode, and follow us on social media for exclusive content.