Equity release customers ‘value repayments and drawdown’ most

The ability to make interest payments and capital repayments are becoming increasingly important for equity release customers as products develop, according to adviser research from AKG.

The independent analysts revealed that two out of three advisers (63%) say clients most value the ability to make capital repayments, while 58% state clients are interested in being able to make interest payments.

The flexibility from drawdown products – which enable customers to manage their property wealth – is ranked the most important by 68% of advisers, compared to 72% who say the ‘no negative equity guarantee’ on plans is the most attractive.

AKG’s industry research paper, sponsored by lender more2life and titled ‘House of the rising sum – exploring equity release opportunities’, predicts steady growth for equity release but lingering concerns about risk management and a need to support vulnerable customers.

What’s more, 55% of advisers expect their equity release business to grow over the next three years, with 12% predicting substantial growth while 43% expect modest growth. Nearly half (47%) of advisers say clients are receptive to how equity release can help them.

Interest rates and product pricing are the main reason for selecting lenders way ahead of other criteria. Around 54% select lenders on range of solutions while 38% pick on LTVs and financial strength and 32% on innovation.

However, interviews with advisers by AKG highlighted risk management concerns and a need to develop guidance and processes to provide comfort for advice firms in the market.

Advisers said they would like to see more emphasis on educational efforts by providers and established best practice on compliance and sales process, as well as more considerable issues around vulnerability and duress.

Matt Ward, communications director at AKG, comments: “The purpose of the paper is to provide practical and educational output which encourages further discussion and debate about the evolving role of equity release in the UK retirement and later life markets.”

“The research shows us that advisers see the ability to offer a wider range of services to clients, being able to help clients with issues they could not help with previously and the provision of an additional revenue stream for the adviser business as key primary benefits of offering equity release.”

He said a steady growth picture is predicted for equity release business. However, the ‘twin hurdles’ of historical perception of equity release and compliance concerns remain a deterrent for some advisers.

Dave Harris, chief executive at more3life, adds: “We were delighted to sponsor this extremely valuable paper which highlights not only where the market needs to innovate and develop but also how we need to clearly communicate our offerings and the support that we already provide for the adviser community.”

“With increasing numbers of consumers turning to advisers for help as they look to take a holistic look at their retirement assets and make sustainable choices around later life, we clearly need to bridge this education gap in order to grow the market.”