Master Later Life Lending - By Air

IHT, Intergenerational Wealth & Enhanced Later-Life Lending: Aligning with the FCA’s Mortgage Market of Tomorrow

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In our third episode of the season, Will Hale introduces Nick Birdseye (Strategic Partner Development Director, Retirement Lending at Legal & General) as he explores how advisers can join up property, pensions and investments in a way that meets today’s regulatory expectations.

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SPEAKER_00:

Hello everyone, and welcome to the next in our series of podcasts, continuing the comprehensive conversations we're having with key stakeholders around the market. Today I'm joined by Nick Birdseye, Strategic Partner Development Director at LNG Home Finance. Welcome, Nick.

SPEAKER_01:

Hi, well, thanks.

SPEAKER_00:

So today Nick and I are going to talk about some of the recent themes emerging from the budget and also the direction of travel coming out of the regulator in terms of the discussion paper on the future of the mortgage market. And think about both of those things in relation to the later life lending market and how it may evolve in 2026 and beyond. So, Nick, just because it's topical, let's maybe focus initially on the budget. And um, you know, some might say it was a bit of a damp squib, really, based on um all of the kite flying the government were doing pre-budget. But but I think the direction of travel is clear from Rachel Reeves and the broader Labour government, and you know, through the freezing of the uh thresholds on IHT and income tax and you know, some of the policies around the the mansion tax, etc., I think you know clearly there's going to be implications for um for some of our older customers. And just give me a little bit of a feel for what you feel that means maybe for the later life lending market and for advisors in this space.

SPEAKER_01:

Well, Will, thanks ever so much for the opportunity to talk today. Um yeah, as far as the budget goes, yeah, uh happily we didn't have uh it was a big bang, we didn't, you know, many of the kites that were flown didn't land, uh for want of a better expression. Uh but I think that the the creeping, I suppose the creeping erosion of the spending value of money uh is going to be an issue going forward. And whilst we might not see immediate um you know immediate um you know high high volumes of of housing wealth being required to be accessed as a direct consequence of the budget, people are going to be poorer um uh going forward. Um so as the uh taxable allowance uh allowances are frozen um and IHT thresholds are frozen, I couldn't believe I checked the numbers at 2009. The IHT threshold has not moved since uh from 2009 to 2031. Uh so by the time we sort of play forward another five years, um, you know, that that£275,000 is going to be worth nowhere near what it was in 2009. Um so I think it's more of a sort of a sort of creeping uh a creeping wave of uh of of uh what might feel a bit like austerity, uh our senior sort of um uh senior clientele facing into that, generally their incomes in retirement are fairly fixed or will will only increase in line with uh inflation. Um and so yeah, I think people are gonna, as a result of this, uh going to feel uh feel poorer as we go forward. And I think from an advisor perspective, um wherever there is complexity and um you know challenge for consumers, then advisors have got the opportunity to step into that and add real value to their customers.

SPEAKER_00:

Yeah, I think that's a great summary, Nick. I like that term creep. I think that's certainly sort of my impression of what we've seen recently. And I think you know, clearly there's some big changes down the line, such as the inclusion of pension assets within the IHT scope from sort of 2027 onwards. And um, I suppose you know what I feel is that really now that um tax is something that that doesn't impact just the the high net worth or even the mass affluent, it's probably something that everyone needs to think about within their retirement planning. So, you know, certainly as air, we believe that you know, for all customers over the age of 55, they need to be seeking advice, and that advice needs to include consideration of their property wealth. Would you agree with that? And and and and how is that you know, if that is the case, how how do we facilitate that in the market in terms of how advice is structured?

SPEAKER_01:

Yeah, thanks for that. Um, well, yes, I agree. I mean, we know that the numbers of people seeking advice are far too low. Um, and also access to advice is much lower than it used to be. Uh, we've seen the major sort of bank assurance models exit the marketplace post-RDR, and and you know, they're they are sort of coming back in some shape or form. The big life offices don't have direct sales or direct advice channels anymore. Um, so the the number of advisors out there uh are much lower than historically they have ever been. The propensity for clients to take up advice or seek advice is is very low. Um, and advisors, depending on whatever flavour they are, but advisors um uh seek customers who have got money. Um and in our market, you know, it's predicated on people who don't necessarily have lots of money but do have value and do have asset. Um so uh we are we're we're we're beginning to be helped by some of the commentary, and I know we're we'll we'll come on to talk about it a little bit um uh more specifically, but commentary that's coming out of the regulator now in terms of housing wealth. Um we at L and G have uh developed some thought leadership around um uh a paper um uh sort of titled Decumulate Differently, and it's all about uh advisors and customers thinking about the different assets that they got and they've got access to and how they put those different assets to work, whether that be um drawdown uh pension funds, whether it be annuitization, whether it be property wealth, whether it be savings and investments, um, and concern and consumers considering that whole basket of assets. But that is, I suppose the consumers after the fact it's you know our big challenge is to get advisors thinking about that whole basket of assets rather than just thinking about you know one or the other. And I think that's our challenge as um you know uh as leading organizations in the marketplace is is taking that thought leadership and that message to market and provoking that change in behaviour and change in outlook uh outlook.

SPEAKER_00:

Yeah, I think that's right. And I think you know, for AIR's members, you know, specifically who are mainly focused on specializing in that later life lending market, I think that represents a great opportunity, doesn't it? Because you know, particularly in terms of driving more referrals from wealth managers, from generalist IFAs, indeed from mainstream mortgage brokers, you know, the the customer need is clear. So as a sector, we've got to get our message out there and and make sure that not just the customer but the intermediaries are understanding it as well.

SPEAKER_01:

Absolutely. Yeah, I mean it we're we're we're on the end of a huge opportunity in terms of our sector and the um the specific skill set and capability set that the advisors who work in our sector have got that that those you know that particular ability to to deal with uh elderly customers or older customers who might have um vulnerable circumstances that they're facing into, as well as the financial sort of pressures that they are they they may well be under. Um but the opportunity to build those professional relationships and those cross-referral um network relationships are are really significant. So yeah, I think it's um it's definitely a space uh for for opportunity, and we should be looking about uh we should be looking at the um momentum that is changing uh and the language that is changing in the marketplace around property wealth and funding in retirement and seeing that as an opportunity.

SPEAKER_00:

Yeah, and and I think building on that, Nick, you know, one thing you know I wanted to move on and talk about is is the sort of direction of travel at the regulators. So we saw the um the recent discussion paper on the future of the mortgage market, and you know, I I think sort of accompanying that, some of the speeches from Nickel Rathey and others at the FCA, we we've seen a change in mood music, I think, around later life lending and equity release in particular. So, you know, moving away from that product of last resource and the idea that this should be a normalized piece of um people's retirement planning. You know, how how do LNG sort of look at that? And you know, what do you see the opportunities on the back of that FCA discussion paper?

SPEAKER_01:

I think I think we we we definitely see it as a as a real opportunity. Um uh Nikel Ruthey has spoken twice this year around the importance of property wealth in retirement planning and retirement funding in the spring, and again at the um LNG Mortgage Club conference a couple of weeks ago. Uh Sarah Pritchott spoke um three weeks ago at the TISA conference and was very clear about her expectation that um property wealth should be included in in retirement funding and retirement planning, and that it's going to be a requirement. It's not going to be a nice to have, it's going to be a need to have. And therefore, the advice uh delivery around that is going to need a lot of work, and both from a regulatory perspective as well as a sort of uh, I suppose a qualification and an enablement um perspective. Um, you know, she uh and he are both very clear that they they expect the delivery of a holistic advice across mortgages, investments, pensions, and property wealth to be uh to be deliverable and delivered. Um and so I suppose our uh our challenge at as a provider and as uh an advisory community is how we you know how we make that happen, whether that is through and I describe it as uh the unicorn advisor, the the the the advisor that can do everything that can you know do the mortgage broke, do the do the investment advice, do the uh accumulation planning, do the pension accumulation planning, do the decumulation uh advice and and uh and then sort out lifetime mortgages and long-term care at the uh at the client at the end of the client's life cycle. Um, you know, there they are going to be few and far between. Uh so in the absence of being able to deliver 20,000 of those into the marketplace, then we're going to we're going to need to work to build those um, I suppose, networks of um collaborating professionals that can enable um consumers to access the the advice that they need. Um as far as the discussion paper goes, you know, we we we uh LNG, you know, we're a very broad church, a very wide business. We we uh had a lot of input into that paper and to into our response. And I think we were quite we were quite firm in terms of our views on on some of the questions, our views on qualifications, uh advice structure, you know, that that's uh the blockages, but both uh and also the pro uh product manufacturing difficulties that that um uh regulation has has given us. Um you know, um, and so uh hopefully we put forward some good ideas and some good provocations, whether they're you know well what comes out of those is is not within our gift, but certainly we we put our hand up and and and gave a fairly, you know, fairly um well it was long uh response.

SPEAKER_00:

So the um the product development piece is interesting, isn't it? Because um, you know, I my observation would certainly be I don't think we've got a lack of product options in the later life lending space. I think you know LNG has been at the forefront of a lot of those those developments as well. And um, you know, I to my mind it is a distribution or an advice challenge predominantly. And you you touched on it around the the unicorn advisor and perhaps you know more robust referral mechanisms may be the answer. But but what would your sort of um what would your guidance be for advisors operating in this space at the moment? Because it is quite a complex landscape, isn't it? Trying to consider Rios against mainstream mortgages, against lifetime mortgages with interest repayment um uh options in place. You know, how should advisors sort of try and um deliver that holistic advice just actually within the sort of mortgage space at the moment?

SPEAKER_01:

I think the key is really robust fact-finding and uh and understanding customers' object uh objectives. And then once you've you've got that, you've got a base on which to um to um you know land your recommendations or base your recommendations. I think the you know with uh with customer acquisition models, you know, if a customer comes to you and says, I want an extra release plan or I want a lifetime mortgage, then that's that's not a given. You know, that's that's the start of a of a of a um you know uh an inquisition, as it were. Um and then um I suppose once we get to the the the question of what's the best lending solution, whether that be uh short-term interest serve, long-term interest serve, capital and interest, you know, Rio, TO, hybrid lifetime mortgage, full fat lifetime mortgage, even home reversion, once um, once we've got the sort of, I suppose the principle of what shape the loan should be, then it's into you know using the right sourcing tools. At the moment, we're not we're not we you know we're not well served by you know a full spectrum sourcing um uh portal that that shows an advisor everything. So if your if your answer is well, it's definitely going to be an intra-served traditional stand-up mortgage, brilliant, I'm onto you know that sourcing engine. Um, but I ought to probably just have a check over here as well, just to make sure that you know, because the intra-serve solutions on the lifetime mortgage space are very good value and you know very flexible and they don't bear credit risk. Um so I think uh my my advice is just be really, really rigorous with the uh with the fact-finding process and the and understanding clients' intentions and their financial horizon as well. So, you know, this how long does this discussion that we're having now remain valid for? You know, and if we've got um you know, if we've got fixed pension income or or guaranteed pension income that's gonna last the whole of life, then that's something to base, you know, to base a recommendation on. But if it's variable and if you know uh circumstances are going to change, then that's the discussion today's discussion might not hold water for more than five years. So we you know we need to be thoughtful about that as well. Um so yeah, I think um it's you know it's it is complex. Um the the lifetime mortgage market, we know where it is, sort of two and a half billion again this year, it might be a little bit more than that for you know, fingers crossed. Um but the actual I suppose over 55 lending market um grew by 19% over the last 12 months. Um so and that demonstrates how much uh how much borrowing is being advised on in the you know in the over 50 space that isn't lifetime mortgage. And I think you know, if if if if advisors who who operate in our marketplace are thinking that, well, that's all I do, then they're missing a missing uh, well, firstly, probably not delivering the best customer outcome they can. And secondly, they're missing a huge commercial opportunity as well because you know they're turning their they're they're focusing on the the two and a half billion over here and ignoring the twenty billion or so, or so, you know, I think it might have even been thirty, uh, over here where actually where there is much more volume and many more customers.

SPEAKER_00:

Yeah, I think that that's I mean you you made some really good points there, Nick. I think completely agree on the fact-finding piece being the foundation to it all. I think that you know that's what difference differentiates advisors from product salespeople. I think if you do the the detailed fact-find up front, then it opens up sort of various different routes, which um you know may or may not be the products that you've got within your own kit bag and maybe can open up different referral routes, etc. So absolutely agree with that. I think I think the overall you know data around the life the later life lending market is interesting, isn't it? Because I certainly think you know it it highlights the importance of advisors having that sort of um broad sort of field of vision. But but I suppose I'd I'd challenge whether it also indicates that some of those mainstream mortgage advisors aren't necessarily looking across at the options that might be available in the in the lifetime space. It it feels like you know, if lifetime mortgages are maybe only you know 10% of the the the volume being done in that later life lending space, it feels like given all the innovation we've seen, that that's probably you know a little bit light, actually. So again, it goes back to we've got to get our message out there, I think, across all of the different types of advisors.

SPEAKER_01:

Absolutely. And we can we can do that, you know, we can bang the drum, you know, as you and I have done for you know many years now. Um, or we can feed back into that regular regulator discussion paper and say, look, you know, did we are not treating customers equally here, you know, these customers over here who are served by a a lifetime mortgage advisor have to be offered residential mortgages for could you know to be blunt. But the residential mortgage guy over here, who's only offering residential mortgages to a 70-year-old customer, doesn't have to consider the lifetime mortgage sector. Um, so that we are the the the the way we are set up both from a regulatory and a and uh you know manufacturing perspective, doesn't serve customers well in in that space, and and therefore, you know, uh customers are tending and probably still getting the products um that are provided by the route they found a way into the market, um, if that makes sense.

SPEAKER_00:

Yeah. I mean again for me it all starts with this affordability assessment, I think. I think in the later life space, you know, affordability is is much more nuanced than just a way of um confirming eligibility for a customer for a particular product. You know, affordability to me means it's understanding, you know, what is the right level of payment that a customer should make, balancing sort of lifestyle requirements and other factors, and and what's the right phasing of that payment as well? You know, how does that repayment sort of change according to different life stages? So it's actually quite a complex and involved piece of advice, I think. And um, you know, I think we've got to equip advisors to to have, as you rightly say, you know, those comprehensive conversations and you know, make sure that they're considering all the options and arriving at their recommendations. So it still feels a lot of work to do, but but you must see some good examples of sort of good practice in this market at the moment. And I know you know you LNG have done a lot around this sort of holistic sort of planning piece. So can you point to some some good examples and you know, maybe how advisors are considering care needs or other things within their advice?

SPEAKER_01:

Definitely. I think you know, in terms of the firm structures, then we've seen some really good examples of firms where they've actually said we understand we need to evolve and therefore we're changing the way we structure our business. If you're going to carry a uh a lifetime orbit license, then you've got to be active in the in the residential space as well. So they're you know, they're actually putting the money where our mouth is and saying, yeah, we'll uh our our people will advise across the the full spectrum. Um and we're seeing some really uh encouraging use of property wealth um both from uh intergenerational gifting, and I'll talk a little bit about that, um, but also for some of those um uh deeper care, you know, deeper customer needs. Um we've got a we've published Recently, a case study, a fantastic case study, around a um uh a lifetime care plan that was um funded through a lifetime mortgage. Um, customer needed£60,000 a year um to fund her residential care at home. Um she has dementia, she's got a power of attorney in place, um, clearly can't make her you know her own decisions. Um, but actually, a uh she was lucky enough to be living in a you know a reasonably affluent house,£600,000 house, did a uh did a lifetime mortgage, um bought a lifetime care plan for£240,000 for funded by a lifetime mortgage, um, and that's guaranteed that payment, that funding for the rest of her life. Um so you know, if she'd done it on just a you know drawdown£60,000, she'd have she'd uh a year would have lasted five years, um, she'd have run out of money, whereas actually she's bought a contract that's going to guarantee her, you know, her care funding for uh for the for the for the rest of her life. Um so yeah, we're seeing we're see we see some of that, which is really encouraging because it's not, you know, as I said to you before, we're not in the market of you know funding speedboats and conservators anymore. You know, our product and our uh you know our uh the housing wealth assets can do so much more for customers, it can and it can really add value to to their lives. And I have a I have a bugbear about property wealth being lazy equity. You know, it's lovely to live in a nice house, but that money, that that wealth is doing nothing for you, and it's doing nothing for your family. Are you just living in it? So, so why not view that um view that housing wealth as a family asset and explore ways of recycling that property wealth down the generation um and putting that equity to to work uh on behalf of the family? And so, you know, we're we're you know, you you'll see it through through your channels as as well as I do, the amount of sort of intergenerational wealth transfer that we're seeing um is increasing, and that's very encouraging. And and the budget, um, certainly you know, the the spring budget, the the changes to pension funds and including it you know within IHG calculations in um you know a year and a bit's time really helps us in that space. Um and and I think you know advisors need to uh tune into the thinking around that, the technical support around that issue, because um you know that that has changed the landscape for for our for our advisor community uh in terms of that particular challenge.

SPEAKER_00:

Yeah, that that intergenerational sort of wealth um transfer piece is is is really interesting, isn't it? I think you know, traditionally maybe equity release could have been seen as quite a selfish transaction, um, like you say, sort of supporting maybe lifestyle aspirations, not sure about speedboats, but maybe conservatories and and and pieces for the older older generation. But you know, like you, um we're certainly seeing more of it being used now to support family. And um MAB did some really good research actually around you know the true cost of renting and and how that can impact people's sort of financial well-being over their lifetime if they end up renting for a long period of time. So, you know, helping children onto the housing ladder or or assisting them with that second step up the housing ladder when families get larger, you know, that's a really powerful use of equity release, isn't it? And something that I think would fit very well with the government's growth agenda and you know, trying to drive equality across the across the generations.

SPEAKER_01:

Absolutely. I mean, we have what I think it's five and a half trillion pounds worth of housing wealth that's unencumbered in the later life market, and that's more than all of the pension funding in the UK um you know added up together. So and that that sits in property wealth, um, and it sits in houses that people are living in, and and and it you know, that that money is not being put to it's not being put to work. Um and so it's not creating any jobs, it's not creating any assets, it's not building any homes, it's not you know, I've got a real thing about it being, you know, as I say, lazy, it's lazy equity. So let's you know, let's work hard to to recycle that wealth um down the generations, put it to work, get it building houses, get it creating jobs, um and um and and yeah, and support that that growth piece. Then we might have to pay a little bit less tax, which would be lovely.

SPEAKER_00:

Yeah, it's um look it it definitely feels, doesn't it? That there's a number of sort of drivers at the moment, whether it be regulation or um government tax policy or or or indeed you know some of the some of the um commercial drivers for the intermediary community that mean later life lending is gonna move higher up the agenda. And um it's been a couple of tough years for the sector. I mean, I know I know sort of you've felt that and a lot of the um a lot of the advisors that you're dealing with would have felt that as well. But I think we we met recently, Nick, and I think you know we we're committed to being um brutally uh optimistic, I think, aren't we, about the market next year. So so so with that in mind, what you know what what are your sort of thoughts on next year and and and what can what action can advisors sort of take now to position themselves for for growth for 2026?

SPEAKER_01:

Um I think that um well we we uh our wide-ranging conversation touched on that the cost of acquisition and you know our you know our market, you know, well I when I started in the in financial services, yeah, I was great at financial advisor, but I wasn't a very good lead generator, so I had to really work on my my lead generation and you know, and and unless I was sitting in front of somebody, I wasn't, you know, I wasn't put to work. And and I and I think that is um that's where I would be challenging advisors is to think about their business models, to think about how they can m make them most effective. Now, if you're in our space and you've come through the last three years, you've probably done a lot of that thinking already. And yeah, if you're still you're still here and you're still functioning, then you've probably adapted to survive. Um but I think that's that's ongoing. I think that's a that is um something that needs constant attention. Um if you're in the space where um you you know you're not a fully qualified financial consultant, you know, level four qualified, so you you know, you you're you you you can't necessarily advise on that sort of wealth stuff, then start to build those financial um you know connections, those professional networks, professional connections. Um reach out to to uh BDMs at lenders, they're really good at supporting that that type of business development. You know, we uh at LNG we run a professional um professional connection development session for for business owners, um, and our BDMs will deliver that. Um and it's all about um you know broadening your customer acquisition model um to help you bring more people into your into your practice. Um and that then will open up those new avenues of uh advice delivery and new opportunities. So um I think you know being really, really sharp uh with your you know, with your your business model, um looking at every way to to bring customers to markets, um, and then and then you know adopting those really high standards around fact finding and uh product searching so that you're you know you're you're uh uh providing the best particular outcome for that individual customer circumstances.

SPEAKER_00:

Well that seems a very good steer for for our members, Nick. I I certainly think that you know customer acquisition is a challenge for for most advisors and most businesses. So so making sure you've got a really robust plan in that area, I think, is is critical. Um so I completely agree with you on that. So um so Nick, I I think that sort of brings us probably to the end of our time today. So so thank you very much for for joining me. Um thank you very much for LNG's support for for Air and for Air's members in in 2025. It really is much appreciated. Best wishes to you and the family for for Christmas and the new year, and let's hope we all face a a slightly easier market in in 2026.

SPEAKER_01:

And as as we as we commit to being uh oppressively optimistic, uh I'll join you at that. And um uh yeah, so I thank you for the opportunity. Uh hopefully, you know, one or two um uh sensible um sort of suggestions there, um, and thanks to your members for their support of uh Leadland Generals through through 2025. We look forward to uh you know a great 2026.

SPEAKER_00:

Thanks, Nick, and thank you everyone for listening to this latest in our series of podcasts covering comprehensive conversations with stakeholders from across the later life lending market. See you next time.