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
Darren Arulvasagam: Busting myths & unlocking property wealth
In this Comprehensive conversation, our CEO Will Hale sits down with Darren Arulvasagam, Strategic Account Manager at Legal & General, this episode explores how education, transparency, and client safeguards are changing perceptions of later life lending, empowering advisers to integrate property wealth confidently into wider financial planning.
Welcome to the next in our series of comprehensive conversations. So today I'm joined by Darren from LNG, who's a strategic account manager. Welcome, Darren. Hello, thank you. So just before we get started into the conversation, can you just give us a little bit of an overview about your background and your role at LNG?
SPEAKER_00:Sure. Well, I've been at LNG coming up four years now. It's my first time working in an intermediary type role. Previously been in banking most of my life, banking and payments, sometime in cash machines, very different sort of world. But a lot of my time has been sort of in the back office of doing with marketing, projects, property, and so on. So this is a different world working with the advisors.
SPEAKER_01:Well, it's great to get some new perspectives, I think. I mean, the later life lending market, as we've heard today at the Air Masterclass in in London, there's there's a lot going on in the later life lending market. It's evolving rapidly. So it's great to get some sort of new thoughts and perspectives. So let me kick off with a with a question. So um one of the barriers we hear a lot is around um customers having myths and misconceptions about equity release. So, how would you suggest that advisors going about building confidence when talking to customers about later life lending solutions?
SPEAKER_00:It's a really good question. I think I think it all depends on what those myths and misconceptions are based on. Often it's it's a real historic thing. So back in the in the 90s, when equity release was a new thing, people are basing those things on the sort of the horror stories that come out of that. And of course, one bad experience gets extrapolated out and becomes a uh you know a big thing. Um, but the the point is that these products have really evolved over time. So the Equity Release Council have got a whole load of product standards that all of the products that we that uh you can find on air sourcing will apply to. So it's from that the the products are so much cleaner, if you like. It's no longer needs to be the lending of last resort, it's much more of a mainstream product. And because those standards are there to give the protections that often are the things that people cite as the problems with equity release products. So that's the first thing. The second thing I'd say is around um complaint levels. So again, the Equity Release Council published results of complaints about where people have been sold products, and it's very, very low. So the actual complaint level, so people having problems with that process or pr problems with the advisor or whatever it might be are very low. And in and indeed that's the same in in LNG. Complaints that come into us about the products are very low compared with the number of transactions that go on. So it's it's safer, less complaints. And then and then the third thing is well, whose role is it to educate? You know, how how do we help people understand what these products can do? And maybe that's a thing of sharing sort of customer stories and testimonials. So um, all of the people that advisors help, and the change that gives people in terms of what they use the money for, those um, those stories, how are you how are you using those to promote what you do and the change that can happen? Because I think if people understood what it could do for me, some of those misconceptions, you're actually going to listen differently and actually maybe think, well, this product could be for me, yeah. Uh rather than the immediate oh yeah, I don't do that.
SPEAKER_01:Let's explore some of those mis myths and misconceptions in a bit more detail, and some of those equity release council product standards. Because for me, I suppose perhaps the key one is guarantee of tenure. So the idea that as a customer you're not going to ever lose your home, I think that's something that maybe is not necessarily understood by customers. And then also the no-negative equity guarantee, the idea that the loan can never exceed the value of the property. So there's no chance of you um leaving your estate with a debt that others have to have to pick up. So for me, those are two key ones. And then maybe finally before getting your comments, the the other thing I hear regularly is people still think that equity release is synonymous with a interest roll-up product. Whereas now, as we know, modern lifetime mortgages can see people make ad hoc capital repayments or even interest sort of payments on a regular basis to mitigate that impact of compound interest.
SPEAKER_00:Yeah.
SPEAKER_01:So I think for me that's another sort of myth or misconception that as an industry we need to work really hard to make sure people understand. But would you agree with those, or are there other sort of ones that you would sort of call out specifically?
SPEAKER_00:I think all of those are really valid for sure. And probably the other one I'd add in there is um I've spent all my life being conditioned into I'm paying off by the house. And so I'm trying to pay it down. Why would I now take a mortgage into later life? Uh especially if I've not got an income coming in in the same way as when I was working. So I think all of those things are absolutely valid, but they're easily answered, aren't they?
SPEAKER_01:Yeah.
SPEAKER_00:There's things there. Like you say, the new products that are coming in, all the innovation. Um we've got a payment term lifetime mortgage, which means that you can service the debt. We've got optional uh payment products in the market where people can service the debt for a period of time or for forever more, depending on what they can do. And of course, there's then OPRs, so you can make optional partial payments, and and that's easier than it's ever been. So there's ways to actually mitigate that roll-up so that there's less debt on the property and more inheritance or legacy that you can leave to your family. So all of those things are there, those safeguards. It's how we get that message out, and how do we promote that to people that these things are there, and and of course that's the role of the advisor.
SPEAKER_01:Yeah, but that promotion piece and the customer awareness piece is key. I was talking to an advisor today based in Twickenham, and he had a customer come to him at their wit's end saying, I'm struggling to pay the heating bills, I'm struggling to um pay my weekly food bills, and yet they're sitting in a property worth over one and a half million pounds with no mortgage debt associated with it.
SPEAKER_00:Yeah.
SPEAKER_01:And it's it just beggars belief to some extent that those customers don't understand that there's options out there which can help them live a much more comfortable and much more fulfilling retirement.
SPEAKER_00:That's right. And it's those, it's typical, isn't it? You know, asset rich, cash poor that just don't realise the opportunities that are out there that can actually unlock that property value for them. Doesn't mean they have to downsize, doesn't mean that they have to um leave that community, those friendship groups that they've got, they can stay in their home, extract that value, and actually be able to put the heating on or do the house improvements, whatever it might be.
SPEAKER_01:So, what can we do to get that message across? L and G, big brands, millions of customers. What what what can we do to really get that message across?
SPEAKER_00:Well, I'm hoping that that the new um DP, you know, the responses to the DP, the discussion page that the structure of the mortgage market. Well, I think that's going to drive out a lot of um ideas and how this market can really respond to the needs of people today and the Gen Xers who are going to be retiring over the next 10-15 years. Because obviously, all of those people will have these needs because systemically we're not saving enough. We're not putting enough into our pensions, we're not saving enough into savings investments. Our property, thanks to um house price inflation, has gone up, and that's where our biggest asset typically is. So, how can you use that? Um, how do we do that? Hopefully, there'll be more um spotlight from the government on this, uh from the regulator. I think there should be a need to break down those barriers in terms of advice so that it's not just equity release advisors, it's mortgage advisors, it's wealth planners all talking from the same hymn sheet about this and getting that message out there.
SPEAKER_01:Well, that's a great link, actually, to my next question. Because one of one of the other questions I've prepared today was around what practical steps, in your view, can advisors take to integrate property wealth into their broader conversations about legacy planning, especially when, as you said, a lot of clients are hesitant to part with their family home.
SPEAKER_00:Well, I think it's all of the things we just talked about in terms of sharing those product standards. So, what are the guardrails that are there to protect you and make sure that that house is not at risk? So you will stay in there and there will still be an inheritance for for your children. There's not going to be a debt that's on that estate. Um, but it's being familiar. I think advisors need to get familiar with what those changes are coming down the track on IHT or the way that IHT will apply to pensions so that you start thinking about that kind of blended approach to what that retirement's going to look like. It's not just I'm going to draw down my pension. It is maybe I'm looking for an income from this element. I'm then going to use my property for this element, and that might be setting up my children with gifting and so on. It's thinking about how am I going to best use all of my assets to actually provide for the retirement or my legacy planning that I want to do? And then what do I need to know so that I can inform my clients all of those things?
SPEAKER_01:And there seems to be a lot of sort of kite flying taking place at the moment by the government in preparation for the November budget in terms of uh where they might sort of boost public finances. Are they going to do it through some sort of property tax? Are they going to sort of change the playing field on IHT? What would be your message to advisors in this sort of very sort of shifting landscape? How should they be trying to give confidence to customers and give them good advice in this environment?
SPEAKER_00:Yeah, I suppose the first thing is keep abreast of what's being done. So what's the mood news that's coming out of the government? There's been an awful lot, you know, is there going to be changes to the pension thresholds or the IHT thresholds? Is housing complex going to work? Uh, is the retirement age going to change? What what what effect will that have? Where are the issues that what what is your client actually saying? What is their fear? Can you get under the skin of that? And then how do you address that? Because you're the one with the knowledge, they're coming to you for advice. So, how can you help them overcome those fears? Uh, get it out there in the open and let's address one of those things bit by bit by bit.
SPEAKER_01:I suppose it's about not as an advisor having misconceptions or reinforcing your own perceptions on a particular customer. It's always sort of struck me that sometimes equity release or later life lending gets pigeonholed to a very specific customer cohort. I mean, you use the phrase sort of asset rich, cash poor, but the reality, and you must see this from an LNG perspective, we see very high net worth customers, we see mass affluent customers, we see Middle England, and we see some people who are sort of really financially constrained at the sort of lower end of the sort of sociodemographic spectrum. So is it that sort of um importance of taking a sort of really open mind to what customers may fit these products, which is important?
SPEAKER_00:Absolutely, yeah. It there's no one size fits all, is there? There's no generic lifetime mortgage customer. And I think that's probably the biggest thing is we might see that as oh, they're over they're over 55, they're vulnerable. Well, I mean I'm only four years away from that, and I wouldn't consider myself vulnerable. Well, in certain circumstances, but um it's you know, all of our needs are very different, aren't they? Absolutely. And all of our stories are different, what we're trying to do, our our home, our lifestyle, whatever it might be. And so it's it's like you say, listening, really trying to understand uh what it is that's a problem. It's even the things like interest rates, you know. We'll say right now it's a high interest rate market. Well, you know that because you're a financial advisor. But someone coming in off the street, they've never looked at these products before. Um, and actually, it's not the product that interests them, it's what they want to do with that money.
SPEAKER_01:Absolutely.
SPEAKER_00:And so it's it's all relative. It's how can you make them comfortable if if that's the right solution? How can you make them comfortable with that as the solution? Yeah, because if that's going to achieve what they need, then the rates irrespective, it's what are they trying to get.
SPEAKER_01:Yeah, I think we get too hung up on rates, don't we? I'm I mean, again, I mean I mean you made the comment that they're high. I'm I'm not even sure on sort of taking a very long-term view that they are particularly high. It's just because our recent memory tells us in you know 2021, 2022 that you know they were down in the two lifetime range, rates and twos and threes. And yeah, you know, we're in a very different world, but that world is not a lot different than what we've seen historically. So I think sometimes advisors can get too hung up on that, can't they?
SPEAKER_00:Yeah, so true. I mean, what was the first mortgage? What was the rate on that when you bought probably about seven and a half, eight percent, yeah, with as a first-time buyer? Yeah, which is now, you know, that that's average, yeah, yeah, or maybe above average what a lifetime mortgage be. So yeah, that things have changed an awful lot. So it's it's it's making sure that as an advisor, your your own preconceptions, your own perspective doesn't cloud uh what your client's gonna think because it's what are they trying to achieve, how do you help them do that?
SPEAKER_01:Absolutely. And and just just to finish, what one of the um what one of the questions we got today in the master class, and if I had a pound every time someone asks this question, was it was about so when are we gonna see an income product in in the later life lending space? And and and I suppose conceptually it makes a lot of sense, doesn't it? If we're trying to position property wealth as being a sort of an integral part of retirement planning, well, why can't you use the equity in your product in that more flexible, sort of income generating sort of way? LNG did have a product in that space going back sort of some time ago, but again, it'd be interesting to get your perspective of of the difficulties in distributing that product and why we haven't seen any development in that area in recent years.
SPEAKER_00:Yeah, it we we did have a product like that, and it was um very complicated. And you know, a lot of what we talked about today in the sessions was the complexity of lifetime lending and trying to make uh I suppose it's it's round holes and square pegs. Yeah. Um clients are all very different, and having a product which is set into certain systems and so on and certain structures, how do you advise on that? Because your income today won't necessarily be what you need as um income tomorrow or in five years or ten years, of course, these are lifetime products. Yeah. So how do you deal with that um to actually make it a meaningful product? And and sadly, the the product design we had before wasn't right for what the market needed. So in use cases, it just didn't work. That said, we do see, and I'm sure all the other providers do see, people using drawdown products in a Sua um income style. And so they will take an initial um amount, they'll have done some cash flow modelling with their financial advisor to say over the next X years I'm gonna need this, this, this, and then they draw down. And of course, that is absolutely a great way of doing it because you're only then uh rolling up the interest as and when you take it. So so that works, and that could be done more. Um, I think there will be things where we try and go back to the um drawing board and see that, and um there's so much innovation in this market, and clearly for all of the sort of systemic issues we've talked about in terms of where where we see this market going, we're gonna need to do things like that as an industry to sort of respond to need as far as time going.
SPEAKER_01:Again, looping back to the FCA discussion paper, I think that was a theme explored, wasn't it? Around sort of encouraging more product innovation. And and when you look overseas, you look potentially to the US market, you see products maybe with with variable rates and that almost allow the house to be used as a bit of a cash machine, so a facility you can draw on sort of um whenever you need it and in different amounts and very flexibly. And that probably doesn't match the funding models that are currently sort of available in the UK lifetime mortgage market, but potentially, you know, we could see innovation in that space.
SPEAKER_00:Yeah, we could see. Yeah. Yeah, that's nice and cyclical as well. I used to work in cash machines, and there you go.
SPEAKER_01:Well, good stuff, Darren. It's been an absolute pleasure talking to you. Thank you uh for joining us today, and uh thank you very much for joining us in this latest of our comprehensive conversations.