What does an Equity Release Adviser do?

What Does An Equity Release Adviser Do? 

Mark Thompson talks us through the role of an equity release adviser.

What exactly does an equity release adviser do?

Generally equity release is done with a lifetime mortgage. An equity release adviser is someone that’s primarily advising customers on how lifetime mortgages work and steering them through the process of releasing equity from their home.

That can be broken down into a lot of processes and I’m sure we’ll talk about that. I don’t specialise in standard mortgages now, or protection. It’s purely equity release.

The key thing with equity release as opposed to as any other mortgage is that by law under Financial Conduct Authority guidelines, it has to be an advised process. So anybody wanting equity release has to have received appropriate advice.

Part of the adviser’s job is ensuring that the fundamentals of equity release have been covered so that clients fully understand it.

What’s the first step in the process of an equity release adviser?

This is my process – I’m not sure how others might approach it. When somebody comes to me, my initial aim is to understand their goals and motivation. I do this generally via a phone call – not necessarily face to face.

Often they have an understanding of equity release or have been told it might be right for them. I would discuss equity release on a general basis – I’m not advising it at this stage. I’m asking what they know about it, why they think it might be right for them and what they are trying to achieve.

I want them to understand as much as they can about the process. They can then make an informed decision on whether to take it further.  I’ll send them some documentation to read.

The key thing is that people need to not feel rushed. I like to give them time and space to soak in what I’ve said.  I recently saw some clients and we ended up having a three and a half hour chat.  They kept asking questions and talking through any concerns to make sure they were doing the right thing.

What’s the next step?

The next stage in the process would be a full fact find. We would book in a face-to-face meeting – either in person or a Teams meeting on the computer. I think that’s important. I need to see a client to really understand how they’re taking things in. Somebody’s facial expression is important, especially if I’m explaining something and they don’t understand.

The fact find is about understanding their current and future financial needs. I talk to them about all their pensions, their income, possible future changes in their life. I ask a lot of questions and often the client needs to get more information about pensions or their financial position in the future.

It’s important that I don’t just take a snapshot of their position and advise. I look at their future needs. If somebody comes to me wanting £50,000 for home improvements or holidays but in five years time, they’re going to need more money, that’s important. I would advise them to have a drawdown facility in that case.

The advice process can be costly, so you don’t want to do it once and then two years later do it all again.

What happens after the fact find?

If the client is comfortable with it, I would then go and source an appropriate and cost-effective product. At the next meeting I go through an ‘illustration’ – how much it will cost over the term, the interest rate, the penalties and all the fine print.

I would write them a suitability report or recommendation. It sums up the conversation we’ve had, what they want to do, what I’m recommending and why.

Then, if we’ve got something wrong somewhere in the process they can see that and let me know. We can then go back to the drawing board. That’s never happened, by the way, but people’s situations can change in the process.

Do you involve the client’s family in the process?

We very much encourage the family to be involved, for support. The satisfaction rate for people taking out equity release is very high. The people that aren’t happy about it are usually beneficiaries, who didn’t realise their parents were doing this and now it’s impacted their inheritance.

If possible, it pays to get the beneficiaries involved early on, so that it’s not a surprise when it happens.

Everybody’s different. Some parents say it’s not their children’s business. Others are quite happy to get the kids involved.  Quite often the client’s children are the first people to get in touch with me to have an initial discussion about equity release.

What happens once the client is ready to go ahead?

If they’re happy with everything and it’s all good to go, I’d apply for the mortgage on their behalf, help them arrange solicitors and surveyors and support them throughout the whole process.

With equity release, solicitors are slightly different. Clients have to receive face to-face advice about the process. We would generally want a solicitor that is experienced in equity release to deal with it.

Some firms only do equity release. They are specialists, and that’s generally what I would advise. You don’t want somebody that dabbles in a subject, especially when it can be quite complex.

The key thing is that I’m involved with the client for the whole process, all the way through. My week doesn’t end on Friday. I speak to clients on Saturday and Sunday – they know they can reach me.

I might answer their questions about moving, if they are using equity release to buy a new house, or around surveys or reports. Anything. I’m there to facilitate the process all the way through.

When should I see an equity release adviser?

You should see one as soon as you start thinking about doing equity release. People can be reluctant, and as they get older, some are worried that as soon as they engage with somebody they’ll never be able to get rid of them.

I can understand that – there are pushy people in all walks of life. But I would ask clients to speak to an advisor as early as they can to help with their thought process. You might rule it out once you have an understanding. You won’t receive any pressure from me, just helpful advice and guidance.

People can make mistakes, by ruling something out or in without taking advice. I’ve talked to qualified financial advisers who have no idea about how equity release works, yet they were advising their clients not to do it. Once I’ve educated them, they have realised that it could be a good solution.

The point is that the person giving you advice might not be the right person to talk to. Go to an expert instead.

What would happen if I called you today?

I would talk to you about the process on that initial call and get an idea of why you might be interested in equity release. I’d then take you through the process we explained earlier.

What is the normal fee for an equity release adviser? Does it cost for that initial conversation with you?

An initial conversation doesn’t cost at all. There’s only a cost if you decide to go ahead.

I’ve got a case that’s going to exchange today that I’ve been involved with for five months. I’ve spent hours on it. The clients are using equity release to buy a property, and if that doesn’t go ahead, I don’t earn anything. They only pay once the lifetime mortgage completes.

That client has known all the way through that it won’t cost them anything unless it goes ahead. I usually finish a conversation with somebody enquiring about equity release by saying they can call me whenever they like, at no cost.

We don’t charge for information – because it might be that equity release is not right for them. But I might be able to steer them in the direction of something that is.

They get an understanding of the avenues open to them. For me, it’s all about helping people release money to enjoy their lives and sort out any life problems.  It’s fantastic to help people move, pay off their mortgage or take that stress away.

In terms of the fee, ours is deemed to be very competitive in the market. It is £1,490 if the mortgage goes ahead. It might sound a lot in relation to a standard mortgage, but equity release is a more involved, in-depth, greater risk product. Everybody in the market has much higher costs.

I would cover off all the costs with the client, including legal and survey costs. Depending on the client’s situation, some may pay the fee direct – we encourage them to do that, rather than borrow the additional amount on the mortgage.

But you can borrow that fee if needed, at a cost, of course – because you’re having to pay interest on those fees.

A lifetime mortgage is not suitable for everyone and may affect your entitlement to means tested benefits, so it is important to seek financial advice before taking any action.  If you are considering releasing equity from your home, you should consider all options available before equity release.  

The interest that may be accrued over the long term with a Lifetime Mortgage, may mean it is not the cheapest solution.  As interest is charged on both the original loan and the interest that has been added, the amount you owe will increase over time, reducing the equity left in your home and the value of any inheritance, potentially to nothing.

Although the final decision is yours, you are encouraged to discuss your plans with your family and beneficiaries, as a Lifetime Mortgage could have an impact on any potential inheritance. We would also encourage you to invite them to join any meetings with your Financial Adviser so they can ask questions and join in the decision, as we believe it is better to discuss your decision with them before you go ahead.