Master Later Life Lending - By Air

Jonathan McCaffrey: Generation X, property wealth & joined-up advice

• Will Hale • Season 2 • Episode 2

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In this Comprehensive conversation, our CEO Will Hale sits down with Jonathan McCaffrey, Specialist Account Director at Just, this episode explores how Generation X is reshaping retirement planning, highlights the role of property wealth in creating financial confidence, and shows how advisers can provide holistic, life-centred advice.

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SPEAKER_01:

So, welcome to the next in our series of comprehensive conversations. Today I'm joined by Jonathan McCaffrey from Just, who is a specialist account director. Welcome, Jonathan.

SPEAKER_00:

Hi Will, how are you?

SPEAKER_01:

So I'm very well, thank you. So we're going to get into a conversation about Generation X. Um we're here in Regents Park today. You've just delivered a fantastic presentation within our Air Masterclass. But before we get into some of that, I'd just like to get a bit of background about you and about your role at Just. So give give us a quick overview about your background and your current role at Just.

SPEAKER_00:

Well, I've been in Lust at Just for a long time. Uh over 21 years. And 20 years in actual lease. So just as a business, specialise in in-and-out retirement clients. So uh annuity retirement income products uh on the pension side, care products, and then also lifetime mortgages.

SPEAKER_01:

Cool. So Generation X. Now, if I remember from your presentation, you are a Generation X client yourself, aren't you? So what is Generation X? Just for our viewers who might not know the definition of Generation X.

SPEAKER_00:

Yeah, that's a good question, Will. So uh Generation X is that is for those people who are born between 1965 and 1980. I'm just qualified. Yeah. Fantastic. Well done. Uh we're we're we're we uh Gen Xs are called the latch key generation. Right. Because we had lots of personal freedom when we were younger. That's the way it's described. Uh also described as our parents kicking us out of the house and uh getting us to make our own.

SPEAKER_01:

That sounds more like it, yeah.

SPEAKER_00:

That's much more like my childhood. Yeah. But that's meant that we we, as a generation, have become much more resilient, um, we're able to adapt to change. And if you look at what we've experienced as a generation, we've seen an enormous transformation in the way we work, in the way we live, in every aspect of our lives, and we've had to deal with enormous levels of change. I remember watching a film recently um with my kids, and they uh we were laughing at the same bit. There's a there was a telephone, an old-style telephone where you could turn the dial, um, and these these kids were trying to press press the buttons to make it work. They didn't understand. So we everything in our lives has changed, absolutely everything. It's really um, I think it's quite it's quite daunting if we kind of reflect back and think, what actually has stayed the same? I can't think of anything.

SPEAKER_01:

No, that's quite right. So so getting into the meat of it for this conversation. So for many in Generation X, traditional pension provision is probably insufficient. So, but they may have significant wealth tied up in property. So, how should advisors discuss later life lending as part of a broader retirement strategy?

SPEAKER_00:

It's a good question. Um, I think we're we're in a I know advisors are in a challenging time. The expectation from the FCA is that they capture the whole customer need. And advisors are often involved in one particular product area um or another, for example, mortgages but not wealth, yeah, or wealth and not mortgages, yeah, or protection and so on. So it's quite challenging. How do I how do I capture all of that client need? And if I don't have a particular specialism in that area, what do I do with that information? Uh a big challenge that we have on the wealth side, where uh just where I also uh specialise, is that wealth advisors won't consider lending at all. So they won't do some of those those basics that are really common in extra lease. They won't check to see if a customer's credit record has deteriorated in a period of time. They won't have an understanding if there's a problem that has appeared for the customer that could suddenly wipe out an ISA portfolio or a pension portfolio. And that's why a really good partnership between a wealth advisor and an extra release advisor could work really well.

SPEAKER_01:

That makes a lot of sense. But I suppose even before having those referral relationships established, it's about ensuring that the advisors have the knowledge to even start talking about that. So, what can we do as a sector, I suppose, to get our message across to more advisors?

SPEAKER_00:

I think a big part of uh what we need to do uh in this market and in other markets is just try and break down those those barriers that built up over time from clients. There is there seems to be a constant negative around financial services in the UK. It's a big driver of our economy. Uh, it helps it helps all of us manage our pension money all the way through to helping us buy a home. And actually, with Ectro East, it solves a lot of problems. When we when we look at what's happening for the retirement space, for example, lots of people don't have enough wealth saved for retirement to fund their retirements. And actually, if we can understand that a bit better, um perhaps we can come up with a viable plan using a property as part of that strategy.

SPEAKER_01:

And it's great to see, as I mean, a big theme of today's session was the FCA discussion paper into the future of the mortgage market. So it finally feels that we've got a regulator who's tuned in to the importance of later life lending. Now, they may have been strong armed by the government a little bit in terms of thinking about how releasing that equity can support their growth objectives, but but it feels like we've got a moment in time opportunity now to really make sure that later life lending is front of mind for all advisors. And one of the things I was speaking to about my one of my earlier guests is um I'm always struck by the difference in the two markets. So these stats will be well known by yourself, but but intermediaries are responsible for about 90% of mortgages sold in the UK, and yet less than 10% of customers, I understand, get access to investment or pensions advice. Yeah. So it feels to me like mortgage advisors, particularly, are in a fantastic position here because you talked about wealth advisors recognizing the importance of housing equity, but if mortgage advisors can have more holistic conversations and form referral relationships with wealth managers, that should put them in a fantastic position to put them at the real centre of that customer relationship. Do you agree with that?

SPEAKER_00:

Is that absolutely and uh when I when I think of the opportunity for mortgage advisors going the other way, it's bigger. So the the in in the from the late from the late 1980s, 1990s onwards, there was a an enormous growth in personal property portfolios. So people having one or two rental properties, um, particularly common in Gen X's, but not just Gen X's. And those people often don't have a wealth advisor. And when we look at the change and what's happening with the change in regulation, sorry, with the changes in in income tax and taxation generally, there's a really good chance that those people are gonna need some IHT advice. Yeah. And it with the right kind of partnership, perhaps going the other way, could an edge release advisor help that customer who's gonna have a really big capital gain. Uh they're tightening up the rules on second hose, thanks very much to our Deputy Prime Minister. Yeah. So that could be prompted. So we're going to have some change coming on those rules. We could we may also have some other changes that come through uh on the back of the pension changes that have been flagged already. Um I think there's a really good opportunity to properly understand for inheritance tax what the solutions for the customer, get a really good partnership together, not just thinking perhaps of the wealth advisor, but also on the legal side, could there be an opportunity with trusts? True. And uh perhaps there's an opportunity for referral to help those struggling advisors uh capture more value, most importantly, deliver solutions for their clients.

SPEAKER_01:

Yeah. Well, thank you in that answer, taking us back to Generation X, because that was meant to be the focus of the conversation. So my next question is around so Generation X clients are often referred to as the sandwich generation. I think that was a phrase you used in your your presentation. And they often feel squeezed by competing financial responsibilities. So, in what situations might later life lending be a suitable tool to relieve that pressure that's coming from different places? And and what considerations should advisors highlight before maybe recommending a a lifetime mortgage or any type of later life lending solution?

SPEAKER_00:

Yeah, that's a that's a good question. So for Gen X, the the sandwich generation describes people like me. So I've got adult children, my adult children, living at home with me, uh, and they they are in some way still financially dependent on me as well.

SPEAKER_01:

Unfortunately, mine are as well.

SPEAKER_00:

So we have the same challenge. Yeah. So uh that means we have this ongoing financial need. We don't have that post so that when I was in my 20s, I was financially independent of my parents. That meant they could get on with their retirement planning, they could, they could optimize their spending uh uh and make sure that they're putting all that they wanted to into their retirement needs. Both of them were able to retire early. Yeah. I I I don't think I'm ever going to be able to retire. Um, when I think about my the living, the cost of living that I I want, I think I'm gonna be one of those 47% of people that don't expect to be able to afford to retire by the time they reach 67. Um, so I think, well, that's uh that's quite a big challenge. Now, added to that, there's the caring needs, and this is where the sandwich comes in. Yeah, so we got the sandwich from the children below us, and the parents above us, and it's the the need for care for the parents. So, what are the solutions in place uh for care for our parents?

SPEAKER_01:

It's interesting, isn't it? I've because because this intergenerational planning was pretty complex, isn't it? And I I sometimes wonder whether you know the solution sometimes is is is to sort of almost miss a generation. So you know, when you we talk a lot about in in this sector about bank of mum and dad, but actually, is it really about bank of grand and granddad? So is is what needs to happen is more grand and granddad um release equity from their home in order to help the children onto the housing ladder, which by doing so then actually releases some of the financial pressure of the sandwich generation in the middle. Yeah. Is is that more how we start having to think about financial planning?

SPEAKER_00:

I think there's a good that's a good starting point, Will. I think we having an honest conversation about money with family members that's so challenging.

SPEAKER_01:

Yeah.

SPEAKER_00:

So how can I start to have that conversation with my parents so that they feel that they can start telling me about their assets? Um, they still see me as the youngest child. So what what is that, you know, how how do they overcome that that challenge of me as a baby to me as a man in my 50s? Yeah, it's a big challenge for them to overcome.

SPEAKER_01:

Dare I say, it all starts with comprehensive conversations. That's that's what we need to be talking about, isn't it?

SPEAKER_00:

Yeah, and and breaking down some of these barriers. Now, the trouble with succession planning, and what what makes most people bulk around succession planning is is what the answer might be. Because the answer is gonna go on to those things that traditionally in these this country we don't like to talk about. We don't like to talk about care. What happens if someone needs to help me eat and feed myself? So what you know, and other things, what happens in that situation? What's the plan? Having an honest conversation about that, having an honest conversation about death, what do people want, what do they need? That's so difficult. But the challenge for us Gen X's is how can we start to have those conversations with our parents and also with our partners? Yeah, can we do that in our own lives? And if we can do that in our own lives, we could take those conversations forward and use them with our customers because it's going to really help them. It will massively help support them for the rest of their lives.

SPEAKER_01:

Well, we've covered a lot of areas in a short period of time, but for me, this I suppose the key takeaways from this conversation is the importance of advice. So customers accessing good quality advice, and then advisors, no matter sort of what the scope of advice that they offer, ensuring that property wealth is front and center of those conversations. So those are my takeaways. So thank you very much, Jonathan, and uh thank you all for listening to this latest of our comprehensive conversations.