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Adviser guide to equity release

Retirement

Created and sponsored by The Adviser Guide to Equity Release is a guidance framework only. Advisers must always refer and adhere to the regulatory regime set out in the Financial Services and Markets Act 2000, and the FCA Handbook. Use of this guide does not alleviate any responsibility or obligation to follow the regulatory regime set out in statute and secondary legislation. For more information on regulatory standards, please contact the Financial Conduct Authority, or visit their website www.fca.org.uk The Equity Release Council will not be held responsible for regulatory breaches incurred by firms relying on this guide for FCA compliance purposes.

November 2017

Welcome to the guide

Section 1: Introduction to the

equity release market

Section 2: Market background

and marketing approach

Section 3: Initial Advice Process

Section 4: Completing the

Advice Process

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The Equity Release Council : Adviser Guide to equity release 3

Contents

Retirement Providing solutions for your future

Created and sponsored by

Adviser guide to equity releaseWelcome to the adviser guide to equity release

We have put together this guide to help you when advising your clients on equity release. This guide will not only show you the features of the available propositions, but also help guide you through the actual advice process. You will find information on market background, reasons to engage in this market, and what qualification routes are required in order to be able to advise on this type of product

ectively. It is designed to give you a deeper understanding of the products, and the wider market, which will help you to become confident about engaging in this market, and in promoting the product’s features and benefits to your clients.

The guide is split into 5 sections

1. Introduction to the Equity Release Market

2. Market background and Marketing Approach

3. Initial Advice Process

4. Completing the Advice Process

5. Adviser’s Toolkit

Sections 1 to 4 are available to all, providing guidance on how best to advise your clients on equity release. The Adviser’s Toolkit is a valuable collection of supporting materials, available exclusively to Equity Release Council members, showing examples of best practice alongside helpful hints and tips regarding the advice process for equity release.

We hope you will find this a useful tool for engaging in this market and sharing the benefits of equity release with your future clients.

The Adviser Guide to Equity Release is a guidance framework only. Advisers must always refer and adhere to the regulatory regime set out in the Financial Services and Markets Act 2000, and the FCA Handbook. Use of this guide does not alleviate any responsibility or obligation to follow the regulatory regime set out in statute and secondary legislation. For more information on regulatory standards, please contact the Financial Conduct Authority, or visit their website www.fca.org.uk The Equity Release Council will not be held responsible for regulatory breaches incurred by firms relying on this guide for FCA compliance purposes.

The Equity Release Council : Adviser Guide to equity release 4


Retirement


Section 1:Introduction to the equity release market

The Adviser Guide to Equity Release is a guidance framework only. Advisers must always refer and adhere to the regulatory regime set out in the Financial Services and Markets Act 2000, and the FCA Handbook. Use of this guide does not alleviate any responsibility or obligation to follow the regulatory regime set out in statute and secondary legislation. For more information on regulatory standards, please contact the Financial Conduct Authority, or visit their website www.fca.org.uk The Equity Release Council will not be held responsible for regulatory breaches incurred by firms relying on this guide for FCA compliance purposes.

November 2017

Guide to equity release

The future of equity release funding and the role of equity release

Welcome to the adviser guideto equity release

The market at a glance

Product types

Consumer protection

Equity Release Customer groups

Property growth

Qualification routes

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The Equity Release Council : Adviser Guide 2

Contents


The future of retirement funding and therole of equity release


The 2014 Budget saw major changes to how retirees can access their pensions. Prior to this announcement, around three quarters of people reaching retirement age purchased an annuity, which provided a guaranteed income for life.

The reforms have provided an unprecedented amount of flexibility for retirees in how they access their savings. But they also provide the potential for people to make financial decisions which may lead to poorer outcomes later in life. With this in mind, the Government set up the Pension Wise service to o�er people access to free, impartial guidance on the options open to them when they retire.

Pension Wise providers do not make recommendations, but help people to ask the right questions7. The Council’s overriding concern since the announcement has been to ensure that the guidance is wider ranging and encourages people to consider all of their options for funding their needs later in life – including housing wealth – and that it signposts people to regulatedfinancial advice where this is necessary. Wewelcome the “principles-based standards”developed by the FCA, to underpin the guidance.

The guidance provided should help people to make informed choices, helping them to take into account issues such as investment risks, and the fact that it is di�cult for anyone to make an accurate estimate of how long they will live. If anything, many people at the beginning of their retirement underestimate their life expectancy8, leaving a risk that they will run out of money before they die – so the guidance needs to help them secure a sustainable income that will not run out.

7. See www.pensionwise.gov.uk/

8. See research from Aviva:

www.aviva.co.uk/adviser/product-literature/view-document.cgi?f=longevityinfographic.pdf

9.Principle based standards: www.fca.org.uk/static/documents/policy-statements/ps14-17.pdf

10. Equity Release Market Report Sping 2016: http://www.equityreleasecouncil.com/document-library/er-council-market-report-spring-2016/

11. Financial Services Consumer Panel Report 2014

The FCA’s standards are heavily focused on defined contribution pension savings as the main source of income in later life9. Although they do suggest asking whether the customer is a home owner or a renter, there is no prompt to consider proactively how housing wealth could provide additional resources to support people in later life. While we appreciate that the initial aim of Pension Wise was to help people make decisions about their defined contribution pensions and not their assets or wealth, as the service becomes more established, people should be encouraged to consider all their options. Increasing numbers of over-55s are looking to draw upon the wealth contained within their home to achieve financial security and stability in later life, with some two thirds of equity release products sold being for drawdown rather than a single lump sum10. The Pension Wise service should take this into account.

Dominic Lindley, a member of the Financial Services Consumer Panel and formerly of Which?, giving evidence at the Pension Schemes Bill Committee in 2014, noted that for one family in four, defined contribution pension savings make up only 4% of their total household wealth11. Our spring 2016 Equity Release Market Report showed that in the second half of 2015, the average amount of housing wealth held by customers was £264,397 for those choosing lump sum lifetime mortgages and £301,971 for those choosing drawdown products. The average amount lent under an equity release policy was £81,324 for lump sum products, and £49,607 through drawdown products with an additional £36,668 reserved for future use. To put these figures into context, the average single defined contribution pot is £25,000.


Equity releaseMany of your clients aged 55 or over who have retired or are about to retire may be finding that their capital and retirement income isn't enough to allow them to live the life they want.

Unpaid mortgages/debts at retirement, and low interest rates (due to recession) o�ering savers limited returns are some of the factors a�ecting later-life income. In addition, mainstream mortgages for older people are less available.

With the pension reforms introduced in April 2015 and the ability for clients to take out their pension savings as cash the need to supplement income through equity release is growing and more and more are looking to equity release as part of the solution to meet their needs, whether it be immediately, or at some point in the future.

Over the last couple of decades, we have seen enormous growth in the property market, with homes now worth many times what were paid for them 20 or 30 years ago. In its simplest form, equity release is a way of releasing some of the money, or equity, stored up in your client's home, without needing to move. The amount which can be released depends on the property value, the client's age, health, lifestyle and individual needs. There are two types of equity release products – a home reversion scheme, where your client is required to sell their home in full or in part, and may be required to pay a nominal rent in return for living there as long as they wish, or a lifetime mortgage, which is currently the most popular type of equity release product.

Lifetime mortgages come in several forms but in the main are either Lump Sum products or Drawdown products, together accounting for 99% of the market*. Drawdown allows people to access their housing wealth in instalments, and can provide an additional source of regular income as well as with meeting one-o� costs. Lump Sum products typically involve a larger withdrawal up front, which might be used for bigger items of expenditure such as clearing an existing mortgage or other borrowing.

Home reversion products used to be the primary product for equity release, but at less than 1% of the market* have been eclipsed in recent years by the flexibility and enhanced loan to value rates of some lifetime mortgages. A home reversion is, in essence, the sale of the property for less than the current market value to the plan provider. In return for the sale at a discounted rate, the reversion product provider gives the original owners a secure lifetime tenure in the property (either through a lifetime lease or trust deed). Historically a home reversion product could benefit customers by o�ering significantly more money than a lifetime mortgage. This di�erential has waned in recent years due to the existence of enhanced lifetime mortgages taking into account customer’s ill-health similar to the enhanced annuity market.


Welcome to the adviser guideto equity release

In light of equity release's growing recognition from UK consumers, regulators and politicians that housing wealth can – and should – play a greater role in financial planning for retirement, the Equity Release Council would like to present you the adviser guide to equity release.

This guide would not have been possible without Pure Retirement's commitment to creating and sponsoring the project. This guide will help you when advising your clients on equity release and will not only show you the features of the available propositions, but also help guide you through the actual advice process.

You will find information on market background, reasons to engage in this market, and what qualification routes are required in order to be able to advise on this product e�ectively. It is designed to give you a deeper understanding of the products, and the wider market, which will help you to become confident about engaging in this market, and in promoting the product's features and benefits to your clients.

*Source: Equity Release Market Report, Spring 2016



HighestLondon:£209.7kavg lump sum

LowestScotland:£39.8kavg lump sum

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The market at a glance

The latest Equity Release Market Report shows that the over-55s’ appetite for unlocking their housing wealth continues to grow across the UK. The retirement landscape has changed considerably after the arrival of the pension freedoms on 6th April 2015 and the introduction of the first part of the Care Bill 2013. This is giving people new options to consider for funding later life, but at the same time, it remains a challenge to amass the savings needed to support a comfortable retirement.

Equity release can play an important role for many in helping to achieve this. It therefore makes sense for any conversation about financial planning for retirement to consider the role that housing wealth can play.

In addition, the sector has seen Legal & General enter the equity release market in 2015. The prospect of more new providers and products entering the market - as well as di�erent funding options helping providers to develop their product portfolios - will introduce further innovation. One example is the option to make interest payments throughout the life of a loan, which will ensure the market can satisfy wider demand.

As more people are attracted by the possibilities o�ered by equity release, it is vital that e�orts are made to maintain the standards of financial and legal advice across the sector, underpinned by appropriate regulation and The Council’s own Statement of Principles and associated Rules and Guidance.

These standards are crucial to maintaining the positive outcomes enjoyed by the vast majority of customers, based on an understanding of how equity release works and the situations in which it can be of benefit.

Review

*Source: ERC Market Report, Spring 2016

Average

withdrawalAverage

lump sumAverage take-home weekly full-time pay

Equivalent weeks' pay (drawdown)

Equivalent weeks' pay (lump sum)

London £72,858 £209,739 £561.71 130 373

South East £44,435 £102,184 £505.38 88 202

South West £34,349 £78,531 £436.03 79 180

UK £49,607 £81,324 £453.36 109 179

East of England £23,902 £74,476 £452.38 53 165

West Midlands £25,214 £61,681 £416.00 61 148

East Midlands £24,137 £60,198 £417.92 58 144

North West £25,266 £57,873 £407.24 62 142

Yorkshire £23,646 £52,799 £406.95 58 130

North East £25,548 £51,233 £398.95 64 128

Wales £19,420 £51,251 £408.47 48 125

Northern Ireland £13,172 £42,739 £402.61 33 106

Scotland £19,616 £39,834 £438.82 45 91

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Product typesThere are two main types of products –Home Reversion products and Lifetime Mortgages

What is a Lifetime Mortgage?

A Lifetime Mortgage allows your clients to borrow a set amount of money against the value of

their home, which can be paid in the form of either a lump sum or to draw down money as and

when they need it. This can be a useful facility, as it is impossible to accurately predict what

your client may need to finance in 10 or 20 years' time.

When it comes to retirement your clients may be looking for flexibility that fits their long term

income and lifestyle needs as well as the one o� expenditures such as repaying an existing

mortgage, home improvements, special purchase or gifts to family. That's why many products

have a range of flexibilities such as further advance, having a facility to draw down against

(usually after an initial amount has been taken) the ability to allow regular repayments (Interest

only) and ad hoc repayments (usually up to 10% per year) as well as features such as protecting

a proportion of the property for inheritance purposes.

What is a Home Reversion Product?

A Home Reversion product allows your clients to access part of the value of their property

while retaining the right to remain in their property, rent free, for the rest of their life. With a

Home Reversion product the provider will purchase all or part of their house taking into

account their age and their health and will provide them with a tax-free cash lump sum (or

regular payments) and a lifetime lease, guaranteeing them the right to stay in their property

rent-free for the rest of their lives.

There is no day-to-day interference and no restrictions on treating the house exactly as before;

as a private home to live in freely. The percentage they retain in their property will always

remain the same regardless of the change in property values, unless they decide to take further

cash releases. At the end of the product plan their property is sold and the sale proceeds are

shared according to the remaining proportions of ownership.

With a Home Reversion product it is possible to give a homeowner some certainty in their

future finances. With a Home Reversion product the client knows precisely what he/she has

parted with and, equally, what has been ring-fenced for later use, possibly to leave in a Will.



Home Reversion products o�er the following;

1. Lump Sum products only

2. Possibility of further advances

3. No interest calculation

4. Simplicity

• Minimum age limit – 65 years – with often no maximum.

• Minimum property value from £120,000.

• Minimum release is £30,000.

Reversion products are not loans, and involve the sale of all or part of the customer’s property for less

than the market value. In return, the customer gains the right to reside in the property for the rest of their

lives.

As this is a straight sale of the property, there are no interest rates to worry about. The customer will

benefit from the increase in price of any of the percentage of the property they retained. If the customer

sells 100% of the property (100% reversion) they will not benefit from any property price increase.

These products traditionally o�er more money than lifetime mortgages, but are less flexible. If the

customer wishes to ring-fence a percentage of their property to be left to their children, a home reversion

plan would ensure this.



Lifetime Mortgages o�er the following;

1. Lump Sum products

2. Drawdown products

3. Interest only products

4. Impaired life products (Lump Sum and Drawdown)

• Minimum age limit – 55 years – with often no maximum.

• Minimum property value from – £60,000. (some lenders have a maximum property value)

• Minimum loan amounts are often from – £10,000.

• Maximum loan amounts can apply but range up to – £4,000,000. (although £750,000 is the norm)

• Minimum additional loans start from – £1,000.

All loans carry an early repayment charge, of which many are linked to gilt rates but increasingly we are

seeing more and more on a fixed rate decreasing over a set period of years to zero. This does not

however mean that people always have to pay an ERC.

For those clients who require a large initial loan or drawdown facility, some lenders o�er high value loans

for a higher rate.

The flexibility o�ered by today’s products mean that they can be more easily adapted to a client’s

lifestyle requirements and retirement plans linking in with their planned changes to income throughout

retirement right through to needing to pay for long term care. These flexibilities can:

• Give client control and freedom over when and how they borrow money.

• No time limit on cash drawdowns.

• No minimum waiting period on further borrowing.

• Facility can be either linked or not linked to initial loan taken.

• The upper limit on loans is determined by an agreed LTV.

• Further drawdowns are NOT subject to additional valuations or underwriting criteria.

(Note: This option is subject to maximum limits and under certain circumstances the facility of further

withdrawals could be restricted).

• Rate paid by your client depends on the level of flexibility they require and the value of the loan they

take out.

• High value lump sum and drawdowns may have a slightly higher rate.

• Current property market – the increases in property values over the past few decades means that your

clients' home is now worth many times what they paid for it.



Consumer protection – Statement of Principles – Equity Release CouncilEquity release customers enjoy three levels of protection, encompassing a structured financial

advice process, face-to-face legal advice and product safeguards set out in the standards.

The Council’s Standards Board oversees the Statement of Principles and standards which

members sign up to, instilling confidence in their products and advice. This ensures customers:

Receive fixed interest rates for lifetime mortgages, or, if they are variable, there must be a “cap”

(upper limit) which is fixed for the life of the loan.

Retain the right to remain in their property for life, provided the property remains their main

place of residence.

Receive a ‘no negative equity’ guarantee so they will never owe more than the value of their

homes or leave any debt behind regardless of changing property prices.

Receive fair, simple and complete presentations of the products they are considering taking

out – including any benefits and limitations of the product, and obligations they must adhere

to. They will be given information about: all the costs that they will have to bear in setting up

the plan; the tax implications; what will happen if they wish to move to another property; and

how changes in house values may a�ect their plan.

Have the right to choose an independent solicitor of their choice to carry out associated

legal work.

Have the right to move their product to another property deemed suitable by the lender

without being subject to any financial penalty.

Receive a certificate recognised by The Council and signed by their solicitor, which clearly

states the main cost to the householder’s assets and estate – for example, how the loan

amount will change or whether part or all of the property is being sold.

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Equity release and adviceAll equity release products are required to involve independent advice. In addition to their regulatory responsibilities, adviser members of The Council are required to undertake the following with customers as part of the advice process:

1 Fully discuss alternatives to equity release including trading down, grants, use of savings and pensionincome, financial assistance from any family member – both for the current point in time and how any of these alternatives may be relevant in the future.

2 Establish or refer for investigation the customer’s eligibility for state benefits and the e�ect equity release benefits may have on them.

3 Consider the customer’s tax position in making a recommendation.

4 Ensure that the customer is advised to speak to their family and any other material beneficiaries of

their Will, and to consult an independent legal adviser.

5 Discuss the customer’s health and life expectancy and take into account the e�ect of positive and negative changes in house values.

6 Explain the impact on their Will and estate planning and how any released funds may impact on theirability to fund later life financial requirements such as long-term care funding.

7 Prior to or with any recommendations, provide the customer with a fair and balanced overview of thepros and cons of both lifetime mortgages and reversion products, taking into account the customer’s current and future financial status.

8 Be sure the contract recommended is the most suitable lifetime mortgage or reversion product and advise that any other outstanding mortgage will need to be redeemed before the lifetime mortgage contract can be entered into.

9 Explain clearly that it is inadvisable that the funds released are reinvested into any medium or long term investments.

10 Fully explain all fees and risks associated with the product recommended, for example: the impact of any compound interest; any early repayment charges; the opportunity to move the mortgage in thefuture will be restricted to properties acceptable to the lender. This may rule out moving toage-restricted or sheltered accommodation, depending on the lender’s policy at the time. If the product is a reversion, fully explain the risk of not receiving the full market value for the percentage sold; or if the product is not from an Equity Release Council member and does not comply with the Equity Release Council’s Statement of Principles, explain what protections the customer is foregoing.

11 Review the customer’s needs and objectives, future plans and ongoing commitments including moving home. This includes income requirements as well as property maintenance and insurance.

12 Ensure that the amount released is appropriate for the customer’s current andfuture requirements (if Drawdown). This includes debt consolidation, if applicable.

13 Check if the customer has put together a realisticexpenditure budget plan for the funds released. Thisincludes making use of drawdown facilities, if applicable.

• Give the customer a copy of the Suitability Report,outlining all of the information in 1-13 above, and confirmtheir receipt and acceptance of it.



Why engage in the equity release market?Rising life expectancy and longer retirements mean that there is increasing pressure on pension funds to

supply the necessary income for your clients to enjoy life to the full throughout retirement.

How many of your clients do you estimate are actually retiring on maximum pension? Although most

people will receive some state benefits, the old concept of depending solely on these in retirement is now

old-fashioned, and in some cases, defunct. Today's average pension fund size

(after tax-free cash) is only £26,000* – which does not buy a sizeable annuity and with pension freedoms

some are choosing to take it all as cash reducing yet further the income they will have in later life.

No wonder then that today's pensioners are looking to alternative sources to fund their retirement needs.

*Source: www.nutmeg.com/nutmegonomics/are-you-saving-enough-for-your-retirement/

Typical Lifetime Mortgage customer base

Most of our equity release customers are aged 55 to 85, with an average age of 71 when an equity release

product is taken, however as more and more product innovation comes through and products become

more and more flexible to the retirement needs of the consumer, we will see an ever changing “typical”

equity release customer. Some using equity release for the more traditional uses and others as a source

of retirement planning alongside pension income and investments.

Typical motives behind the purchase tend to be related to:

The need for a more comfortable life:

• Pay o� outstanding mortgages, debts and bills.

• Necessary home improvements.

• Income replacement.

The desire to do the things they want to:

• Holidays.

• Luxury home improvements e.g. extension, conservatory.

Helping out the family:

• Money for children.

• Money for grandchildren.



Equity Release Customer groupsExtensive customer research and analysis of customer response data identifies three broad customer

groups* for lifetime mortgages:

Housing equityRecent research tells us that 61% of single pensioner households have a total pension income of less than

£10,000*, and 45% of couple pensioner households have a total pension income of less than £15,000*.

Meanwhile, 83% of over 55's agree that they think it is important to stay in their own home during

retirement.

There are many reasons for this, including sentimental reasons – it is the house their children grew up in,

or they have a good circle of friends nearby or that they simply do not want to move, but bearing in mind

that even though house prices have fallen recently, the value of property has grown by up to 200% in the

last 10 years*. It makes sense to look at the variety of options on o�er.

Almost 80% of people aged 65-74 own their own homes*. Estimates for the total level of equity in older

people’s housing are as high as £1.4 trillion*. This provides a large potential source of funding for things

which may make life easier for older people. While some people may choose to downsize in later life,

many people will prefer to stay in their own home, and equity release allows them to unlock money from

their property.

*Source: O�ce For National Statistics Census 2011

Customer groups

Segments

Low incomes, littleretirement savings

60-90

Still live in family home,likely to require benefits,day to day living, have amortgage in retirement

View home as main asset,financial language abarrier to purchase

Clear debts and easeincome burden, coste�ciency of drawdownproposition. Education.Mitigate concernsthrough Q and A’s

45%

White collar, company orprivate pension savings

55-80

Still live in family home, maybe working part time,want to enjoy retirement,family supportive

Su�cient savings for thebasics of life, but not thethings or lifestyle they want

Flexibility of drawdownproposition gives you accessto funds when they need it

45%

Senior managers, morefinancially astute

55-75

Maintain lifestyle intoretirement with travel, bigticket spends, IHT planning,children financiallyself-su�cient

Su�cient pension incomebut want to maximise theirestate

Possibilty of IHT mitigation,use ER as part of retirementplanning

10%

Group 1 Group 2 Group 3

Characteristics

Age

Lifestyle

Attitude

Messaging

Proportionof market


• There are now 11.4 million people aged 65 orover in the UK.

• There are over 23.2 million people aged 50 yearsand over, over a third of the total UK population.

• There are now 14.9 million people in the UK aged60 and above.

• 1.5 million people are aged 85 or over.

• In 2010, approximately 640,000 people in theUK turned 65; in 2012, it the figure was about800,000. The number turning 65 is projected todecrease gradually over the next 5 years toaround 650,000 in 2017.

• There are now more people in the UK aged 60and above than there are under 18.

• The number of centenarians living in the UK hasrisen by 73% over the last decade to 13,350 in2012.

• When asked what stage of life they werecurrently in (given choices), 55% of 60-64 yearolds said ‘later life or old age’, but 43% of themsaid ‘middle adulthood’. For 65-69 year olds, thesplit was 75% ‘later life’ and 23% ‘middleadulthood’.

• Demand for long-term care funding is increasing,specifically, with regards to dementia wheresu�erers are to double by 2050.

• Yet people’s ideas of when ‘later life’ startedwere quite early: in the 60-64 year old group,men said age 61 and women said 64; in the65-69s, men said 62 and women said 66.9.

• The number of people aged 60 or over isexpected to pass the 20 million mark by 2030.

• The number of people aged 65+ is projected torise by nearly 50% (48.7%) in the next 17 years toover 16 million.

• The proportion of people aged 65+ will rise from17.7% currently to 23.5% in 2034.

• The percentage of the total population who areover 60 is predicted to rise from 23% at presentto over 29% in 2035.

• By 2086, about one in three people in the UKwill be over 60.

• The number of people over 85 in the UK ispredicted to more than double in the next 20years to nearly 3.5 million.

• The population over 75 is projected to double inthe next 30 years.

• Nearly one in five people currently in the UK willlive to see their 100th birthday (see section onlife expectancy below).

• However, according to the National Statistician,the UK’s population is ageing more slowly thanother comparable counties within the olderpopulation.

• 3.5 million 65+ live alone. This is 36% of allpeople aged 65+ in GB.

• Nearly 70% of these are women.

• 2 million people over 75 live alone; 1.5 million ofthese are women.

• 58% of widows (women only) are aged 75 andover.


The UK’s growing older population



Growth of average UK property valuessince 1973

On average in the UK, a property worth around £10,000 in 1975 is worth almost £250,000 today!

Source: Nationwide housing index, Q4 2015

The graph above shows how the value of a property in 1975 has grown and what average percentage

growth we have seen over the the last 20 years.

Compared with pension income it is of no surprise as to why property has become such an important

factor in assessing someone’s wealth and therefore having the ability to access as a part of a client’s

retirement planning is crucial both to the client but also to the country as a whole as it seeks to satisfy

the needs of an ageing population and the costs of delivering pension income and future care costs.

House price growth based on a 10k house in 1975

• Black and minority ethnic (BME) groups makeup over 16% of the population of England, but8% of people in England aged 60 and over.

• Government estimates that between 5 and 7% ofthe UK population are lesbian, gay or bisexual.On this basis, we estimate there are between600,000 and 840,000 LGB people over StatePension Age in the UK.

• It is estimated that there are 14 milliongrandparents, 1.5 million of whom are under 50.

• An estimated 88 per cent of people aged 65 andover give their religious a�liation as Christian,and 8% ‘No religion’.

Source: Age UK fact sheet on Later Life in the UK – September 2015

Value of 10k house in 1975 20yrs average annual growth rate



Qualification to advise on equity release and achieve permissionsSince 6 April 2007, all new equity release advisers will need to be fully qualified to o�er advice on lifetime mortgages and/or Home Reversion products.

The main routes for advisers are via the CII and LIBF although there are other routes and a very many qualifications that can be “grandfathered in” if they were obtained prior to relevant regulatory dates. There are also qualifications that are no longer obtainable, but still enable holders to carry out advice on equity release business.

The qualification route to advise equity release is straightforward and the routes are detailed below:

Current and Legacy QualificationsAwarding Body

Chartered Institute of

Bankers in Scotland

Chartered Institute in

Securities and Investments

(CISI)

Chartered Insurance

Institute (CII)

LIBF University College

Required Module Blocks

Mortgage Advice and Practice

Certificate - Paper 1 and:

Equity Release Mortgage

Advice and Practice Certificate

Fellow or Associate with the

module: Certificate in

Investment and Financial Advice

Certificate in Mortgage Advice

Certificate in Advanced Mortgage

Advice

Certificate in Equity Release

(formally called Certificate

in Financial Planning and

Lifetime Mortgages)

Mortgage Advice Qualification

(MAQ) plus entry requirements

Cerificate in Mortgage Advice

and Practice

Certificate in Regulated Equity

Release

Qualification

ERMAPC

Fellow or Associate

CII CMA (sometimes

referred to module number)

CII CER (sometimes

referred to module number)

MAQ

CeMAP

CeRER

If you choose not to qualify, you still have the option to take part in a Referral Service.

Section 2: Market Background and Marketing Approach

Back to main menu


Section 2:Market background and marketing approach

Retirement


November 2017


Market background

Typical customer types

Potential customers for the equity

release market

Consumer reasons for choosing

equity release

Approaching the market

Approaching the customer

Initial and follow up letters

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Contents


Market background

In the UK in 2016 there are 23 million people aged 50 and over, and as we have seen in recent decades life expectancy has increased. The number of people aged 65 and over is expected to rise by over 40% in the next 17 years, from 9.6 million in 2005, to over 16 million in 2033*.

The UK population is ageing. Age UK’s recent Care in Crisis report showed that the number of people aged 65 and over grew by over one million between 2005/6 and 2012/13, with the number of people aged 85 and over rising by 30%1. At the same time, estimates for the total level of equity in older people’s housing are as high as £1.4 trillion2. An ageing population brings with it a number of challenges, but equity release has the potential to help meet these, while contributing to some of the key policy challenges of the current parliament.

People are living longer and spending longer in retirement; The UK's average retirement age is 63.8 years. Today a man who works to 64 spends on average 31% of life in retirement. In 1950, the average man retired at 67 and spent 18% of life in retirement*. However, many individuals of pensionable age have not made adequate provision for their retirement.


*Source: Age UK Laterlife Factsheet Feb 2016

1. Care in Crisis Report 2014: www.ageuk.org.uk/Documents/EN-GB/Campaigns/CIC/Care_in_Crisis_report_2014.pdf

2. English Longitudinal Study of Ageing (ELSA)



Typical customer types

Those looking to maintain lifestyle and comfort during retirementTypically:• Longer purchase process as less immediate need for funds.

• Main criteria is value for money.

• Pragmatic in nature and financially astute.

• Optimisers, planners, progressive outlook.

• Love their home life and don’t want to move.

Reasons to choose equity release:• Children/grandchildren.

• Non-essential property improvements.

• Holidays.

• Alternative to down sizing.

Those looking to supplement retirement incomeTypically:• Short purchase process as more immediate need.

• Main criteria is ensuring they get enough money to meet their needs.

Reasons to choose equity release:• Supplement everyday spending.

• Health requirements not covered by NHS.

• Vital property repairs.

• Retirement income.

• Debt consolidation.

Mounting consumer need to supplement retirement income is fuelling the equity release (lifetime

mortgage) market.

Simply arguing equity release is a great product does not fit with where most people are as the evidence

shows. They need to be taken through the options they may have for dealing with income or capital

shortfalls and in which equity release is one possible solution*

*Source. Council of Mortgage Lenders



Potential customers for the equity release market

According to the Council of Mortgage Lenders the

equity release market has huge potential*, a view

confirmed by its growth over the last 2 years, with

no sign of it reducing anytime soon.

The combination of better interest rates, rising

property values plus social and demographic

changes means more people are using equity

release as a way of funding their retirement, and

with the onset of pension freedoms, clients are

beginning to look towards the whole of their

assets as they seek to reach their target income in

retirement.

This means that your potential customer base

could e�ectively be anyone over the age of 55

that owns their own home (with or without a

mortgage). Any existing mortgage will have to be

repaid from the proceeds of equity release.

Where equity release may be relevant

With retirement such a hot topic, and with the

confusion around pension freedoms, this is a

natural topic that you could build a seminar

around and introduce the concept of equity

release as a retirement planning tool.

Considering customers by location is another way

to think about things, looking at areas where

demographics and property values match those

of existing equity release customers.

Partnerships are something else to consider,

expanding your product range to those that you

already have a partnership arrangement with or

o�ering it as a new service to the many potential

partnerships out there that as yet have no one to

refer to – local solicitors, estate agents

(remembering that equity release can be used to

purchase a property too), mortgage brokers’ and

IFAs who are not active in the equity release

market place, to name just a few.

Such partnerships can result in high quality leads

and valuable long term relationships base on

mutual trust. Although earnings will have to be

shared, the quality and frequency of leads can be

a great advantage for advisers new to the market.

*Source: BBC News: http//news.bbc.co.uk/1/hi/business/4236431.stm



Highlights• 58% released equity to carry out

home and/or garden improvements

• 23% repay mortgages

Home and/or gardenimprovements 58%

Go on holiday28%

Pay debts (e.g. loans,credit cards) 29%

Help with regularbills 13%

Clear outstandingmortgage 23%

Treat or help familyor friends 25%

Consumer reasons for taking out an equity release product

55-593%

70-7430%

65-6927%

75-7917%

60-6412%

80-848%

85+3%

CUSTOMERSBY STATUS

Couple61.5%

Single Female25.7%

Single Male12.8%

CUSTOMERSBY AGE

Source: Key Retirement Market Monitor July 2015



Approaching the marketWhen it comes to equity release, there is often a lot of confusion and there is a real need to help

customers make an informed choice that’s right for them, allowing them access to all the information

they need.

Here are a number of key points to consider:

1. Determine your ideal customer type

When considering whom the customer is, think about who is currently buying the product and who is

likely to buy it: Male or female; age group; geographic location; income bracket; social class;

geodemographic classifications; lifestyle and media preferences, such as what are their lifestyle habits,

e.g. shopping, holidays, interests or what newspaper do they regularly read.

2. Selecting appropriate communication

Decide if direct mail is the most e�ective way to talk to your customers. If it’s not, still apply the same

rules for identifying your ideal customer and then consider what is the most e�ective way to

communicate with them e.g. local press, door drops, website etc. Put yourself in your potential

customers’ shoes and consider the most appropriate way to reach them. Remember this is an older

audience, so think about the types of publications they will read, places they will visit etc. All media

owners, such as local press, hold detailed customer profiling information. You can use these media

profiles to gauge whether or not they are suitable for communicating with your potential customers.

Analysis• Average age 71, up from 69

• 62% of those releasing equity

are couples

• Twice the number of single women

release equity than single men

EnhancedLifetimeMortgage4%

PRODUCT MIX

Reversion0%

EnhancedDrawdown3%

Drawdown60%

LifetimeMortgage33%

Source: Key Retirement Market Monitor July 2015

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3. Generating new customer leads

You can either (a) work with your existing customer data, (b) generate new leads (c) buy-in consumer

data or (d) seek referral partners such as other advisers, solicitors, etc:

Existing customer data – your database will consist of past, current and potential customers. It is

important to check the accuracy of the data and ensure that it is up to date. Review customer

contact details such as title, name, address and check against any notifications of deaths, change

of address etc. This ‘cleaning’ process ensures that the direct mail activity is as e�ective as

possible. After all, there’s no point mailing 1,000 customers if only half of them still live at the

stored address.

Generating new contact leads can be done in a variety of ways including receiving referrals from

past and existing customers, advertising and even organising seminars to let potential customers

receive information they may find useful.

Buy-in consumer data – you can source consumer mailing lists to match your potential customer

types. To find a mailing bureau, have a look in your local business directory or under any one of

the website search engines. The cost of mailing lists will vary significantly according to the type

of data and the quantity that you are buying. Prices are generally quoted on the basis of cost per

thousand (CPT), so, an example of this would be, if you were to buy a list of 5,000 at a CPT of

£95, it would cost you £475. The CPT value could be as low as £10 and as high as £300 per

thousand. Remember the reason why one list may be more expensive than another may be down

to the quality and relevance of data e.g. a list providing access to older people rather than a lot of

younger people will be more valuable to you given the customer base for equity release.

Whether you decide to buy-in or use your own existing customer data, you need to be mindful of

both the Telephone Preference Service and the Mailing Preference Service. Both of these services

o�er consumers the choice of removing their names, addresses and phone numbers from or

being added to mailing lists. This helps you to ensure you are communicating only with those

who may be interested in you products and services.

4. Using your customer information wisely

Segmentation of the data you are using is possible where you already have some understanding of the

needs of your customers and why a lifetime mortgage is likely to be of interest. The next step is to group

together the customers who share a common need for the product e.g. those who are very low on

income and may need a lifetime mortgage to meet everyday expenses.

5. Potentail for referrals

Customer referrals are quite common in the equity release sector. Customers often have friends that are

in the same situation and may also be interested in equity release.

Adviser Toolkit: Marketing Support

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Approaching the customerThere are a variety of tools that you can use to engage with your customer in the initial approach stage.

You can use telephone scripts, which can help determine particular needs of your customer at an early

stage, plus identify their hopes and aspirations for the future. Initial approach letters can help you to

create interest from your customer base, and follow up letters can help you move onto the next stage of

fact finding with your client. To support you, we have samples or templates of initial approach and follow

up letters available in the appendix section of this guide.

Telephone scripts

To best serve your clients you need to understand what motivates them. So during the initial fact-finding

telephone conversation you need to get a snapshot of their current situation. This includes considering

not only a client’s financial position but also their hopes and aspirations. Use active listening techniques

to encourage your client to do most of the talking.

Occasionally summarise and paraphrase the client’s comments – “so you’re saying…”.

Ask a question and remain silent until the client provides a complete answer.

Repeat specific words the client has used – “you said you wanted to be secure and

contented in retirement…”.

It’s important to remember not to apply pressure or put words in people’s mouths, but to genuinely listen

to your client’s needs.

Use open questions to gather information; they begin with words such as what, why, when, how, where

and who. This type of empathic questioning will encourage trust and build rapport.

You can also use closed questions to confirm or qualify information; usually they can be answered with a

‘yes’, ‘no’ or a single word. However, the use of closed questions should be kept to a minimum to keep the

conversation flowing.



• Retirement may mean more time but less

money.

• Occasionally summarise and paraphrase

the client’s comments – “so you’re saying…”.

• Ask a question and remain silent until the

client provides a complete answer.

• Repeat specific words the client has used,

e.g. “you said that security was important to

you”.

• Ways to boost retirement income – use

existing savings or investments, claim all

the benefits you are entitled to, sell your

property and move to a cheaper one, take

out an equity.

• Types of equity release products – home

reversion, lifetime mortgage.

• Popularity of lifetime mortgages – industry

stats.

• Key features of LTMs – stay in home, no

monthly payments, reduction of value of

estate, no negative equity guarantee.

• Invitation to request further information

about equity release products.

Possible points to include:

Section 3: Initial Advice Process

Back to main menu

Initial approach lettersSpeculative letters should help create interest in lifetime mortgages and encourage the reader to find out more. Focus on the outcome ie what it means to them ie no financial worries, improved lifestyle, etc

Follow up lettersAfter your clients have received information from you about equity release, a follow-up letter can be used

to prompt further action. Again focus on the outcomes for the client.

Possible points to include:

You have told me that you would like to achieve… etc, but also include the statutory warnings.

• Reiterate how retirement can mean a change in income levels.

• Any e�ect choosing an equity release product may have on your tax status.

• Entitlement to some means-tested benefits may be reduced or removed.

• Your ability to sell your home or to move may be a�ected.

• Releasing equity also means your estate would receive less and it may receive nothing from the sale of

your home.

• Clients include family or friends in discussions about equity release.

• Use of plain language.

• Invitation to request a personalised illustration.


Section 3:Initial advice process

Retirement


November 2017


Disclosure

Three simple steps

Initial disclosure document

1st appointment process

Fact Finding

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Disclosure

This part of the guide is designed to help you through the initial stages of the advised equity release purchase process, from initial client contact, through to completing the first appointment and fact finding.

Client contact by telephone

When the initial contact with the client is by telephone, you must make them aware of the following:

• Your name.

• The name of your firm.

• The scope of service you can provide, and the product range you have access to.

• That you will provide the client with advice on their need for equity release.

• How you will be remunerated.

When you communicate information to your client, you must ensure that you communicate in a way

which is clear, fair and not misleading. This means that you must judge the level of knowledge that your

client has regarding the potential contract to be recommended. Be aware that your client may not have a

high level of knowledge of financial terminology or jargon, so ensure that you present all information as

clearly as possible. Take extra time to explain financial terms clearly if necessary, so that your client can

make an informed decision.

Disclosure at o�er stage

Lenders may need to ask you to give information to help them prepare the o�er. For example, they may

ask about the level of service provided, or any fees that you have charged. A lender must provide an

o�er document which complies with the rules when making an o�er for an equity release product (Home

Reversion product or Lifetime Mortgage). The o�er must include an updated and suitably adapted Key

Facts Illustration (KFI) as an integral part of the o�er.

In any communications to your client, you must describe any regulated lifetime mortgage contract as a “lifetime mortgage” and not use any other expression to describe such a mortgage or omit that description from the name given to any product that meets the definition.


Contents


Disclosure




• Your name.




















Disclosure




• Your name.



















Explaining “scope of services”

At the initial contact with a potential client, you must ensure that they are adequately and clearly

informed of the scope of services that you o�er.

The scope of services you might o�er is as follows:

• Unlimited • A limited number of lenders • Single lender

This is not an exhaustive list of what can be disclosed, but any disclosure must be clear.

Suitability of advice

A personal recommendation has 3 elements:

• You must give advice relating to the merits of the client entering into a regulated lifetime mortgage or

home reversion contract.

• The advice must relate to a specific mortgage.

• The advice must be to a specific person in the capacity as borrower or potential borrower In order to

establish suitability of the equity release contract, you must ensure that the benefits to the client

outweigh any adverse e�ect on:

• The client’s entitlement (if any) to means tested benefits.

• The client’s tax position.

And

• That any alternative methods of raising the required funds have been investigated.

A�ordability (if recommending a Lifetime Mortgage contract)

An adviser must explain to the client that the assessment of whether he/she can a�ordto enter into a regulated lifetime mortgage contract is based on:

• Current interest rates, which may rise in the future.

• The client’s current circumstances, which may change in the future.

• Information provided by the client on his/her income and expenditure.

• Any likely change to the clients’ income and expenditure, and any costs that the client may have to

meet in relation to any o�er periods on the lifetime mortgage.

Debt consolidation

Where the main purpose of taking the lifetime mortgage contract is to consolidate existing debts, you

need to take account of the following:

• The costs associated with increasing the period over which a debt is to be repaid.

• The costs associated with swapping from simple interest to (potentially) compound interest.

• Whether it is appropriate for the client to take an unsecured loan.

• Where the client has payment di�culties, whether it would be more appropriate to negotiate an

arrangement with his/her creditors, rather than to take out a lifetime mortgage.


Disclosure




• Your name.



















Three simple steps

It is recommended that you always carry out a

three stage process, as this gives the clients time

to fully understand and assess the advice being

given.

STEP 1Initial disclosure

STEP 2O�er supporting literature to client

STEP 3Carry out Fact Find

Initial disclosure should be carried out, and once

established that the clients wish to continue, to

investigate the possibility of taking out an equity

release product, the following items should be

given to the client:

� Initial Disclosure

� Client Fee Agreement

� ERC brochure

A Fact Find can then be carried out. The Fact Find

should be completed with the clients. This should

then be signed and dated by the client and the

adviser. You can now proceed to research the

case.

Carry out research and then print o� or request a

lender KFI. Suggested research tools include

Iress/The Exchange, Assureweb, Defacto and

MoneyFacts.

Fees and concepts

Equity release is a fully advised purchase which

cannot be bought any other way, and as such

requires that the adviser be appropriately

authorised to advise in this specialist area. The

specialist nature of this market suggests and

confirms that advice fees can be charged, and in

almost every circumstance advice fees are

charged.

Fees are normally added to the loan or monies

raised and the acting solicitor would deduct the

fee from the loan and send to the adviser. There

are also some products where the lender o�ers

their products as “fee free” paying both the

solicitors and advisers fee to maximise the

amount the customer receives and in some cases

can be the di�erence between being able to repay

an existing mortgage or not.

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Audience 2

Less comfortable in retirement

What do they look like?

• Have reached retirement still with a mortgage and without any means to repay.

• Do not have the means to pay existing bills with current income.

• Likely to have not foreseen fund shortage and therefore have immediate need.

• Short purchase process as have a more immediate need for the funds.


• Traditional outlook.

What do they do with the money they release?

Essential funds for:

• Repyament of mortgage

• Bills

• Vital property repairs

• Operation not covered by NHS

• Adapting house for old-age use

Alternative to downsizing:

• Don’t want stigma of giving up their home

Situation precludes inheritance issues:

• Need for funds outweighs children's needs

Additional points to consider:

Di�erent age groups may have di�erent reasons to buy

an equity release product. However, in general, we have

identified that customer needs do di�er by age group.

1st appointment processKnow your market

Research has shown that, typically, there are two key audiences for equity release. However, please

remember that there are strict lender eligibility guidelines which we must follow.

1. Those who want to maintain their lifestyle – sustaining comfort in retirement

2. Those who are less comfortable in retirement – needing cash more urgently.

Audience 1

Sustaining their comfort in retirement


• Have enough money to live on presently but see need for future additional funds.

• Likely to foresee fund shortage and plan accordingly.

• Longer purchase process as less immediate need for funds.

• Find equity release appealing and use it to maintain their current lifestyle.


• Pragmatic in nature (Financially astute).

• Optimisers, planners.

• Progressive outlook.


Supplemental income for:

• Holidays.

• Home improvements.

• Funds for children.

• Use as part of planning their retirement income.



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Initial disclosure documentWhen you anticipate giving a customer advice or personalised information about a mortgage, you

previously had to give them an Initial Disclosure Document form. The IDD promoted consumer

understanding about the services you o�er. This is no longer a requirement following the Mortgage

Market Review, though some firms have continued to use this document to promote good practice.

Irrespective of whether you use an Initial Disclosure Document or not, you must give the same

information to the customer on first contact.

The IDD explains to the customer:

The scope of service you o�er. If you base your service on a limited number of lenders you must

tell the consumer that he can ask for a list.

The service that you will provide.

What he will have to pay for your service.

Whether any fees are refundable.

Your regulated status.

Contact point if he has a complaint, and

That they are covered by the Financial Services Compensation Scheme and the level of

protection provided.

Client fee agreement

The charging of fees should be discussed with the client

during initial consultation. The level of fee to be charged

should be agreed with the client(s) and documented in a

client fee agreement. This document sets out the formal

fees which are chargeable and the services agreed

between the client and the Adviser. The document should

be edited to show the specific client’s name and address

details. The agreement should be signed and dated by the

client(s). The client should be provided with a copy of the

Fee Agreement for their records. The original should be

held on your client file. Chargeable work will not start until

this time has elapsed.



Audience 2












• Bills

















Audience 1













• Holidays.








Audience 2












• Bills

















Audience 1













• Holidays.






Product types/features

Your customers need to be in control, therefore it

is important that you provide them with all the

facts. Remember to o�er examples of the benefit

of each individual feature.

Some examples of this are:

� O�er a proposition that is clear and easy to

understand – this makes the decision process

easier, as the client is aware of what they

need to do now and any action they could

take in future, such as taking additional

drawdowns.

� Speedy access to funds – clients may need

funds quickly, to fund essential home repairs,

or medical bills.

� O�er a proposition with a competitive rate,

and the flexibility of further cash releases if

they need funds in future – your customers are

happy that they are getting a good deal, and

that they have flexibility to meet any future

needs.

� Try to provide assurances for future financial

needs – reassures your client that they have a

"safety net" of additional funds to take, should

they need it.

� O�er flexibility and choice – the best product

may not necessarily be the one with the best

rate, if future flexibility is compromised. Try to

o�er a product that can cope with future

financial needs.

Always remember to always give equal prominence

to the disadvantages of a product. These

disadvantages maybe consistent through all

lifetime mortgages or home reversion products,

but may also be particular to a specific product.

• Does the customer understand the

implications of rolled-up interest?

Give a specific example of how much will be

owed and when within the product literature,

to avoid misunderstanding.

• Means tested benefits may be a�ected by

money released through lifetime mortgages

and home reversion products.

• Although possible, moving home at a late date

becomes more complicated if there is a

lifetime mortgage.

• Home reversions may mean that it is

impossible to move home at a later date.

• The estate that you leave your family will be

reduced by a lifetime mortgage or home

reversion plan.

Customer needs by age

� Clients below age 55 – not normally eligible for an equity release product

� 55-65 year olds eligible for some equity release products for financial support

� 65-75 year olds need pension or additional financial support

� 70-75 year olds private health care or property maintenance

� 80-85 year olds may be on their own and need more pension

� Over 85’s need care assistance as they don’t wish to move out of their house

� Impaired health gives access to higher LTVs



Keep it simple

As we have seen through the market history and background, equity release appeals to 2 groups of

clients – those that are often younger, wealthier and more financially astute, looking to maintain their

standard of living, and those who need the money released to supplement an insu�cient income. More

financially astute clients should see the benefits that taking out an equity release product can provide,

particularly when used for financial planning such as IHT mitigation. Short term gain is not the priority in

these cases and you should instead focus on the long term benefits to the client and their estate.

However the presentation of equity release to often older, less financially sophisticated clients should be

kept as simple as possible. The real and immediate benefits to lifestyle that the client can achieve should

be shared as well as the longer-term benefits, whilst remembering to give a balanced view of product

disadvantages alongside the benefits.

Discussion skills

� Keep the language as simple, clear and factual as possible

� Try to explain situations of what a lifetime mortgage could enable the client to do that they cannot do

currently. This is a very strong message.

� Demonstrate how they can remain independent without having to rely on their family.

� Keep in mind for your client the immediate life changes, over the next six months and into the future,

say around 10 years’ time.

� As the client grows older, you have an opportunity to develop your advice e.g. the first drawdown

released could be used for client’s income. Any further drawdowns could be used to help the family, or

for IHT planning.

� Show how family members can be helped financially now, not after client’s death.

It is important if possible to involve the client’s family. The family will often endorse the purchase if they

are involved in the discussion from an early stage. It will also avoid any potential problems in the future if

potential inheritors are aware of any implications on the estate.

The sale of equity release deals with product features,

potential client benefits and emotions. Your clients

often feel a strong emotional tie with their home –

it is where they brought up their family for example,

and often where the family gathers for celebrations.

This approach does not usually require more than two

visits to your client, and can be quite a short time

commitment. It is essential however, to ensure that you

gather all of the relevant facts – we will deal with this later

in the “Fact Finding” chapter.



Fact finding

The final stage of the 1st Appointment process is

to conduct a full fact find. This will help you in

your later stages of researching a suitable

product, helping profile your client(s) present

financial situation, needs and wants and any future

requirements

Supporting notes

In addition to the fact find document, which can

help guide you in asking all of the relevant

questions, it is a good idea to take supporting

notes. This can help record any particular feelings

your client may have about aspects of the

product, or any future needs, wants or aspirations.

Means tested benefits

The information on the Fact Find must be taken

prior to discussing any options with your client.

You must ‘know your client’ before o�ering any

type of advice. The fact find must contain

su�cient details for advice to be given. If any

piece of relevant information is missing, the

suitability of advice must be in question. The FCA

and Compliance teams look at the Fact Find on

the basis ' there is no such thing as too much

information on a fact find'. There should be no

blank spaces on the form. This, of course, must be

balanced out with common sense and if a piece of

information is missing which would have little or

no e�ect on the recommendation made, it could

be ignored. The relevant section of the form

however should be completed to confirm that the

information is not relevant/not applicable or that

the client was unwilling to disclose.

ImportantYou should provide clients with the opportunity to seek expert tax and benefits advice from their The Citizens Advice Bureau before they enter into an equity release scheme.

Free guides are available on benefits for use with

clients –

1. Department of Work & Pensions (DWP) –

“Benefit and Pension Rates” Leaflet

Ref BRA5DWP – see website

www.jobcentreplus.gov.uk

2. Age Concern – “Financial help in retirement”

Leaflet Ref ACIG10 – see website

www.ageconcern.co.uk

3. Money Advice Service (MAS)

www.moneyadviceservice.org.uk/en/categories/benefits

The Fact Find must include the following facts:

• Current Income – including sources and type of

income.

• Current Assets.

• Current Liabilities.

• Current Expenditure.

• Employment Status.

• Any likely significant changes in the near future.

• Any current state or other benefits claimed.

• Estimated Property value.

It is important that the following information is also gathered on the fact find:

Client• What is their state of health? (some products –

about 17% of the market – o�er higher LTVs for

impaired lives)

• What other assets or investments are available?

• Are there alternative sources of raising income?

• Have they considered moving home and

'downsizing'?

• Are there any grants available?

• Are they currently receiving any State Benefits?

• How much do they want to be able to leave to

their family?

• Have they spoken to their family?

Adviser Toolkit: Fact Find Example



Needs

• Why do they need income or capital?

• Is capital required for a large purchase or

ongoing commitments?

• Are they likely to want to raise further money in

future?

Risk

• What is the client's attitude to future house

inflation?

• What is the client's view on future interest rates?

(to help determine fixed or capped rate)

• Check a�ordability – can the client a�ord to pay

interest monthly or is roll-up more suitable?

Property

• What type of property is it?

• What is the construction?

• Is it the main residence?

• Is any business conducted on the premises? (or

any businesses adjacent to the property)

• Are there agricultural ties or similar?

• Is the property freehold?

• If leasehold what is the unexpired term of the

lease?

• Is it Ex Local authority or MOD?

• If a joint application – is the property owned on

a joint tenancy or tenants-in-common basis?

Assessment of Fact Find data

Your assessment of the client's requirements is

based on the information provided by the client.

The information gathered on the Fact Find should

be gathered and recorded in the Suitability Letter.

As on all regulatory paperwork, each client party

to the mortgage must sign to confirm that they

accept the information given is correct.

The original client Fact Find must be completed in

full, signed by all clients and verified with your

own signature and date. The date of the fact find

should always precede any advice having been

given.

Copies should be sent to your client for their own

records and a copy placed on your client file. You

may wish to forward a copy to the clients’

solicitors to assist them to understand the advice

provided and complete the mortgage process.

Section 4: Completing the advice process

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Section 4:Completing the Advice Process

Retirement


November 2017


Analysis

Research

Research tools

Suitability

2nd appointment process

Advice process

3

4

6

9

11

13


Contents

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Analysis

Analysis of Fact Find

As with any advice, the advice you give can only be as good as the information gathered in the fact find,

the research undertaken, and the analysis of that research in relation to the client’s stated needs and

wants. Equity release is no di�erent, but o�ers some crucial di�erences and points to consider.

You will very likely end up with several requirements from a client which e�ectively becomes a "best of

all worlds scenario" but unfortunately not all products are aligned in such a way, therefore you need

careful analysis of the real priorities and as such need to prioritise the client’s needs and wants, and try

to align the research in order of these priorities.

Client requirements

Your client’s individual circumstances, needs and wants vary, therefore it is important to consider which

are the most important decision criteria for each individual case. Bear in mind that often there are several

important criteria, which should be considered in order of client’s priority:

Your client may want the cheapest deal – so a decision is made on the basis of the o�ered rate

and fees.

Your client may be looking for the security of fixed early repayment charges (ERC's).

They may wish to leave an inheritance to the family – in which case, a product which o�ers an

equity guarantee or a means of servicing the interest could be selected.

Your client may need flexibility to take more cash in future – so no restrictions on future

drawdowns are important.

They may have a need to take the most money they can get now and in the future – so a product

o�ering a high LTV should be selected.

Your client may want to take an initial lump sum but with a facility to take more later in which

case a drawdown product may be the best solution.

All of these are available in the market but not all from the same provider. So, you need to consider which

of these are the most important, which are second and so on, and which provider satisfies most of these

requirements and/or satisfies them in order of priority.


Adviser Toolkit: Fact Find Example



Research

Things to bear in mind

This is a much more advised process than a traditional mortgage, particularly as you have to take into

account the client’s pension status, benefits status, investment holdings (if any) and IHT liability, so

creating a very detailed report from your analysis is crucial. Fortunately, help is at hand with some of

these aspects from the Government’s pension agencies and companies such as Fintal and Equibus for

help with benefits calculations.

It may well be often the case that you do not choose the company that comes out on top of an lress or

assureweb research report, as the default placement is likely to be either rate or LTV derived, and may

not match your clients priorities closely enough. When rates di�er slightly by marginal basis points and

LTV's di�er by only a small percentage of 1 or 2%, it is most important to consider the whole o�ering and

solution that proves "best advice" rather than just this one particular aspect.

You also need to consider in your analysis the requirements set out by the FCA such as the possibility of

downsizing or taking in a lodger, all of which are aspects of analysis that you must consider before

creating your advice and detailing it in a suitability letter.

We have included example suitability letters covering these aspects for you to use in the document

library of this document but it is up to you to keep them up to date and note any changes that the FCA

requirements may bring.

There are some other simple key points in the checklist in the suitability advice guides in the document

library section that again should help you in your analysis.

RememberOne thing to be careful about when analysing research is that some providers quote monthly rates and

others quote annual rates, so be careful to compare on a "like for like" basis.

Research tools

Before applying for an equity release product you

should consider the di�erent grants and benefits

your clients may be entitled to claim. These tend to

be di�erentiated by those that are means-tested

and those that are not. It is the first category that

is of greatest interest when considering an equity

release product, as depending on the

interpretation of the government towards the

release of equity from the home, this may have a

direct bearing on entitlements.

Broadly speaking, if the money is used for “needs

related” purposes i.e. a necessary home repair or

improvement, then the capital relating to that

amount may be excluded from the assessment

(receipts must be supplied to back up the

expenditure). If it is for lifestyle reasons it may be

treated as “income”. The Council of Mortgage

Lenders worked with Ferret Information Services

to produce FINTAL for lenders and intermediaries

to use to assess the impact of di�erent schemes

on an individual's tax and benefits, and as a

member of the ERC they have continued to

develop their data to support the sector.

For further information on Ferret systems, please visit www.ferret.co.uk



Whole of market

You will be able to o�er products from all of those

providers who deal through Intermediaries. In

addition, you should be aware of special terms

that may be available to you via your Network or

mortgage club.

Research software

Research cannot truly be undertaken without the

use of an appropriate sourcing system.

As a part of your research you may wish to

consider using Iress/Exchange Research Software

or Assureweb Equity Release Research Software

(the majority of Lifetime Mortgage products and

Home Reversion products are included on both),

or MoneyFacts or Defaqto although the latter two

are only updated on a monthly basis.

Both Iress and Assureweb Research Tools use the

same format –

To compare products you need to enter

information on selected screens:

� About Your Clients – basic client information.

� If your client has any medical conditions that

might mean they get enhanced rates

(assuming a higher LTV is needed).

� Property Details – including clients’ estimation

of value (please ensure that your clients’

expectations are managed in the current

property environment) and any mortgage

outstanding.

� Amount to raise – this can be a lump sum,

income or regular payments (drawdown).

� Product Options – the type of scheme can be

limited to lifetime mortgages (with certain

interest rate options or home reversion

products). Impaired life rates can be included

and capital protection can be added. You are

then presented with a results table where you

can view interest rates and other details for

Lifetime Mortgages and Home Reversion

products.

Click on “Comparison Report” to generate a PDF

document detailing the results. You can enter your

and your client’s details to appear on this report.

Save this report or print it directly from the PDF

document for your client.

Click on “Start Again” to amend your inputs.

Click on any product name in the results table to

drill down into further product information and

links to provider literature and in some cases their

website.

For lifetime mortgages clicking on “Annual Table”,

this will display a screen where you can see how

much interest will need to be repaid on the

mortgage and the e�ect of the value of the

residual estate depending on house price growth.



• Whether the customer has a preference or need for any other features of a regulated lifetime mortgage

contract or a home reversion scheme.

• Attitude to risk as these products carry a potentially higher risk than Lifetime Mortgages.

For example, if the customer dies or goes into long term care soon after taking out a home reversion

product, the cost would be much more expensive. A 100% home reversion product on a £250,000

property would get a 65 year old £100,000. As this £100,000 was for 100% of the property, if the

customer dies the next day it would be a very costly transaction for the estate. If the customer feels that

he will live a long time, then this cost becomes closer to that of lifetime mortgages.

A�ordability

An adviser must explain to the customer that the assessment of whether he can a�ord to enter

into a regulated lifetime mortgage contract is based on:

• Current interest rates, which might rise in the future; and

• The customer's current circumstances which might change in the future.

• Information that the customer provides about his income and expenditure, and any other

resources that he has available.

Debt consolidation

Where the main purpose is to consolidate existing debts, the adviser must also take account of the

following, where relevant, in assessing whether the regulated lifetime contract is suitable for the

customer:

• The costs associated with increasing the period over which the debt is to be held.


Generic information

It is possible to provide a client with generic information regarding Lifetime Mortgages. However, if

information is given relating to the specific amount the client wishes to borrow, the intermediary must tell

the customer that they have the right to request an illustration on any regulated mortgage contract

which the firm is able to o�er the client. The intermediary must also give information on the product

range they are able to o�er.

For example, the written statement “you can generally borrow up to 27% of the value of your property on

most Lifetime mortgages” is permitted. However the written statement “you can borrow 27% of the value

of your property on the XYZ Lifetime mortgage” would require you to inform the client of their right to

request an illustration.

Obligation of the adviser

To reach the point where you are able to make a recommendation to your client you will have:

• Gathered facts regarding the client needs and circumstances

• Ensured the client has confirmed he will su�er no detrimental e�ects from loss of benefits by

proceeding with this lifetime mortgage.

• Researched the market place for a mortgage contract that meets these requirements

You are under an obligation to recommend the most suitable contract from the range available to you

having taken into account the needs and preferences of the client.

• Rejected recommendations

If a client rejects your recommendation, you are able to recommend another regulated mortgage

contract as long as it meets the client’s stated needs and preferences. The fact that a secondary

recommendation had been made, the reasons why and acceptance of the client must all be recorded in

the Suitability Letter.

If a client rejects all the recommendations you have made you should close your mortgage related

dealings with that client and mark the file accordingly.

Home Reversion Schemes consideration

In order to establish whether a Home Reversion Scheme needs to be considered, you must evidence:

• Whether the customer's requirements meet the eligibility criteria for the regulated lifetime mortgage

contract (for example, the amount that the customer wishes to borrow, or the loan-to-value ratio) or a

home reversion scheme;

• The customer's preferences for his estate (for example, whether the customer wishes to be certain of

leaving a bequest to his family or others);

• The customer's health and life expectancy.

• The customer's future plans and needs (for example, whether the customer is likely to need to raise

further funds or is likely to move house);

• Whether the customer has a preference or need for stability in the amount of payments (where

payments are required) especially having regard to the impact on the customer of significant interest

rate changes in the future; and

Research toolsIress (previously The Exchange)

The iress service provides detailed searches, including the provision of lump sum products, drawdown

products, and impaired life products as well as a many of the di�ering product features many of these

products can have.

Simple searches to return the maximum loan amount available from each provider, or the best rate or

feature delivers a ranking of providers to aid in the decision process and enables an adviser to

substantiate their advice and recommendation, having first identified the customer’s initial loan

requirements, use this search to display all providers who will meet the customer’s requirements.

If the customer has a defined need for regular payments, your search can then be enhanced to include

flexible products that allow drawdowns at regular intervals. Finally, if the customer would like the benefit

of a flexible cash reserve for further potential payments, but unable to state when this will be drawn

down, providers who meet the reserve will be displayed.

Assureweb

Assureweb aims to help intermediaries improve their service, e�ciency and profitability by doing

business online.

Assureweb has a clear focus to expand its provider and product coverage, as well as developing new

services and solutions for advisers and partners.

New features are continuously being added to the portal, such as an equity release comparison tool

allowing advisers to get free quotes and access products from a panel of equity release providers.

The presence of the ERC logo means users can be sure that products go beyond FCA regulations to meet

the higher standards required by the company.

The Assureweb portal and hub are designed to integrate with existing front and back o�ce systems.











A�ordability







Debt consolidation



customer:



Generic information








































SuitabilityTemplate letters

Suitability advice guides

Suitability Letters are considered best practice since they ensure that the FCA requirements for record

keeping and providing the client with a written summary of all aspects of the sales process are met. The

FCA does not prescribe that advice must be given in the form of a suitability letter, but does require firms

to keep adequate records of:

1) The customer’s information, including that relating to the customer’s needs and circumstances

that are obtained in the fact find process.

2) The reason why a firm has concluded that the advice given to a customer complies with the

suitability requirements demanded by the FCA.

3) Records must be kept for a minimum of 3 years from the date on which the advice was given.

Given these requirements, it seems prudent that this can be accomplished by a Suitability Letter

alongside the mandatory KFI documents and a copy is retained by the advising firm for its regulatory

record keeping.

The FCA have specified that the following terms must be used in correspondence and other client

communications:

An “Equity Release mortgage” must now be referred to as a “lifetime mortgage” or “home reversion product”

Content of Suitability Letters









A�ordability







Debt consolidation



customer:



Generic information






































As shown above, the KFI must provide a very clear, consistent summary of the key points of the type and cost of the mortgage, including any fees payable.

The suitability letter should be sent prior to the receipt of a completed application form, as it advises the customer of the recommended product and respective application form which they will then need to complete.

The suitability letter is arguably the most important document, as this will confirm to the client not only why recommendations have been made, but also why any recommended products are considered suitable to the clients' circumstances (present and future) and how objectives will be achieved as a result of the recommendations.

It is highly probable that a client, if asked, could very well explain why a contract was set up, in the days or weeks after receiving the mortgage o�er. It is much less likely that the same client could do this, some, 2 years or more after the event without referring to the appropriate suitability letter.

A high quality “Suitability Letter” will contain enough information and can be phrased in such a way to allow that same client to read through it again, irrespective of the time lapse, and immediately understand what it is they have and why they have it.

Adviser Toolkit: Suitability Report Example



The following should always be covered:

� The reasons why the loan is being applied for

(be as specific as possible).

� The reason why you have recommended a

specific product for your client.

� The benefits of any capital/income generated

from the Lifetime Mortgage or reversion

scheme must outweigh any adverse e�ect on

the client’s entitlement to means tested benefit

and/or the client’s tax position.

� You should confirm that you have provided

clients with the opportunity to seek expert tax

and benefits advice before they entered into a

lifetime mortgage or Home Reversion.

� Alternative methods of raising the required

funds (including normal Interest Only

Mortgage, Home Reversion Schemes and Local

Authority or other grants) are proven to be

less suitable.

� You should make your recommendations in the

knowledge of, the client’s situation and

attitudes toward:

• The impact on their estate of the lifetime

mortgage.

• The client’s health and their life expectancy.

• The client’s future plans.

• Reduction in asset (property) value for later

use i.e. long term care funding etc.

� Additionally you should also:

• Consult with other family members where

appropriate (at advisor’s discretion) and with

permission from the client.

• Advise that independent legal and benefits

advice is taken.

• You may wish to only recommend schemes

where the lender is a member of the Equity

Release Council organisation. Reasons

for using a non-ERC member and what this

means in terms of protections/guarantees

not o�ered, should be clearly documented.

If the adviser has insu�cient knowledge of the

range of alternatives to a regulated lifetime

mortgage contract, or the means tested benefits

and tax allowances, then they should refer the

client to a source for such information.

The outcome of the discussions on all these issues

must be recorded in the Suitability Letter.

Prominence of relevant information can play a key

role in ensuring that a communication is clear, fair

and not misleading. Where this is the case, the

adviser must consider prominence in the context

of the communication as a whole. Use can be

made of the positioning of text, background, and

text colour and type size to ensure that specified

information meets the requirements of the rules.

Consequentially, suitability letters (and other

customer correspondence) must not be formatted

in any way that diminishes the prominence of the

requirements in the previous sections, or any

other FCA regulatory requirement. Inappropriate

wording (i.e. wording of no relevance to the client

circumstances) within the suitability letters can

also cause the prominence of FCA regulatory

requirements to be diminished.

A copy of the suitability letter should be printed

onto headed paper and sent to the clients to sign

and date.

The original suitability letter signed and dated by

the client, must be retained on your client file, and

a copy sent to the client.



2nd appointment process

Re-cap & gain commitment

As with any two call process, at the beginning of the second call it is important to re-a�rm the

discussions from the first call to remind both parties of what was agreed and to set the agenda for the

second meeting. With regards to equity release, it is also important to check for any changes, as in many

instances the clients will have spoken with their family and or revised what they need their money for,

and this may change the advice you are about to give.

It is however most important to rea�rm the features and benefits of equity release products in relation to

their needs, focussing on the benefits and the impact it will have on the quality of their life. By confirming

this you are e�ectively agreeing that the presentation you are about to give will (as long as it matches

the clients’ needs and requirements) result in the client going ahead.

Key facts illustrations

The FCA require all advisers to give consumer product information in a set format called a KFI, at specific

stages of the equity release sales process.

A KFI must be provided at point of recommendation and fully explained to the client before the

application for the recommended mortgage is submitted. You should provide either a paper copy or an

email document that can be printed.

You must provide a client with a KFI in the following circumstances:

� When you recommend a particular Lifetime Mortgage or Home Reversion product.

� When you provide written information that is specific to the amount that your client wishes to borrow

and the client requests an illustration.

� If the client requests written information that is specific to the amount that they wish to borrow.

The KFI should clearly show all fees, including the broker fee that you charge. It should

also set out the amount of commission that you will be paid by the lender. You must

not complete an application for a mortgage, or accept any payment that would commit

a client to a particular mortgage, until the client has received and reviewed the KFI.

Re-cap

and gain

commitment

Discussion of

KFI and

Suitability

Letter

Asking

for the

business

Objection

handling

where

required

AdviserToolkit:KFIExample



Accuracy

If you obtain a KFI for a client from a lender, you

are responsible for its accuracy but you can

reasonably rely on the information given to you by

a lender to be accurate. A tolerance of 1% or £1

(whichever is the greater) applies to some figures

on the KFI, where you do not get them from the

lender. You can rely on a third party, such as a

mortgage sourcing system provider, to provide

you with KFI’s that meet this tolerance and still

comply with the rules on accuracy. However, you

must be able to show that it was reasonable for

you to rely on this information. To do this, you

must conduct a test of reasonableness on every

KFI from a mortgage sourcing system provider to,

as far as you are able, verify that the KFI is

accurate.

Content of the KFI

You must have a good understanding of the

content of a KFI.

Confirming client intentions to proceed

The question must be asked "would you like to go

ahead?" or "shall I complete the paperwork?" for

example.

Remember that it takes approximately three

months to complete an equity release product

giving the client plenty of time to change their

mind but remembering that they will incur costs,

so it is better to deal with any concerns or issues

before completing an application.

Remember!If a recommendation is made over the telephone, then it is best practice to send a written suitability letter and KFI within 5 working days.

Adviser Toolkit: General Objection Handling

Advice Process

Client application

The client now needs to (as appropriate):

� Provide proof of identity and proof of residency.

� Pay any valuation or service fees applicable.

You should supply your clients with the following:

� Copy of client signed Fact Find (marked as client copy).

� Client Fee Agreement (marked as client copy).

� Copy of KFI for clients records (marked as client copy).

Ideally, a suitability letter should be issued prior to the customer sending back an application. The

customer should sign and send back the suitability letter alongside the application to evidence that they

have received and understood your recommendation.

If the results of the valuation report necessitates that your advice changes, this can be evidenced in a

secondary letter, sometimes called a material change letter, to evidence the change in circumstances and

the resulting recommendation.

What happens next



Application

What

happens

next

Solicitor

optionsReferrals

Valuation

instructed

Valuer

visits

client

Application

completed

Application

sent to

provider



� You may also wish to agree a target

completion date with the clients’ solicitor to

ensure that completion takes place within the

o�er term (usually 45 days). The o�er will

include reference to the terms and conditions

of the mortgage, and clients’ solicitor should

ensure that –

� The Solicitor’s certificate is signed and

returned to the provider’s solicitor before

completion;

� All terms and conditions outlined on the o�er

document have been met;

� For freehold property, documents disclosing

good and marketable title to the property are

forwarded;

� For leasehold property, the client must have the

right to assign the lease, and the residue of the

term of the lease must be more than 80 years;

� Proof of adequate buildings insurance.

Solicitor guidance notes

These notes are designed to provide you with

practical guidance as to how you can work with

your clients’ solicitor for Equity Release.

On confirmation from your clients that they have

accepted your recommendation and they wish to

proceed with the equity release, you will ask them

which solicitor they wish to use. They may decide

to use a solicitor already known to them but not

known to you.

The Law Society and the Solicitors’ Regulatory

Authority (SRA) produced some ‘Equity Release

Guidance Notes Nov05’ to assist solicitors. These

Notes state that – “It would be wrong to assume

that equity release schemes only require an

understanding of conveyancing practice.”

The SRA also produced the ‘Solicitors Code

of Conduct’ (see SRA website -

http://www.sra.org.uk/solicitors/handbook/code/content.page ) which includes the

following extract -

Chapter 1: Client care

Outcomes

You must achieve these outcomes:

O(1.4) you have the resource, skills and

procedures to carry out your clients’ instructions.

O(1.5) the service you provide to clients is

competent, delivered in a timely manner and takes

account of your clients’ needs and takes account

of the clients’ best interest.

Therefore the SRA have clearly indicated that

equity release requires more than conveyancing

knowledge, and if the solicitor lacks competence

to deal with an equity release instruction, then

he/she should refuse to act.

It is therefore suggested that, you (the adviser),

with the client’s permission, telephone the client’s

solicitor regarding your client’s intentions as

follows –

� Confirm that your client has instructed you

that they wish to proceed with a lifetime

mortgage where you have made the

recommendation;

� Confirm that your client wishes to instruct the

solicitor to act for them;

� Confirm that the solicitor is happy to act for

the client and that the solicitor has had

experience in dealing with equity release

conveyancing;

� It is also important that your client is made

aware of the fees to be charged for the

conveyancing, and normally these would be

disclosed to the client when the initial

discussion regarding the instruction takes

place;

� If the solicitor is not happy to deal with the

instruction, then you may wish to confirm this

to your client, and suggest that they consider

selection from other options available (The

National Solicitors Network or the Equity

Release Solicitor’s Alliance (ERSA)).

� Once the solicitor is appointed you may wish

to confirm the advice process, the o�er period,

refer to any terms and conditions in the o�er,

and ensure that the solicitor is happy with

completion of the solicitor’s certificate.

� To assist the solicitor with the completion of

the solicitor’s certificate, with the clients’

permission, you may wish to forward a copy

suitability letter, highlighting the paragraphs

within the letter that refer to the points

included on the Solicitor’s certificate –

opportunity to discuss with beneficiaries,

opportunity to discuss state benefits

entitlement with benefitsspecialists, that the

product is suitable for the clients, security of

tenure, a fixed interest rate and the e�ect of

accrual of interest.

� You may also wish to agree a target

completion date with the clients’ solicitor to

ensure that completion takes place within the

o�er term (usually 45 days). The o�er will

include reference to the terms and conditions

of the mortgage, and clients’ solicitor should

ensure that –

� The Solicitor’s certificate is signed and

returned to the provider’s solicitor before

completion;

� All terms and conditions outlined on the o�er

document have been met;

� For freehold property, documents disclosing

good and marketable title to the property are

forwarded;

� For leasehold property, the client must have the

right to assign the lease, and the residue of the

term of the lease must be more than 80 years;

� Proof of adequate buildings insurance.

Asking for referrals

Why ask for Referrals?

Referrals are a cost e�ective and e�cient method of increasing your client base and have the potential to greatly expand your business.

Referrals made by existing clients are invaluable. People who have been referred by existing clients often approach a meeting with the desire and expectation of conducting business. Furthermore, the referred client will have been told by their

referrer that you o�er a worthwhile product with an exemplary service. This enhances your credibility and will help to establish an immediate

trust and rapport between you and the new client.

Solicitor guidance notes

These notes are designed to provide you with

practical guidance as to how you can work with

your clients’ solicitor for Equity Release.

On confirmation from your clients that they have

accepted your recommendation and they wish to

proceed with the equity release, you will ask them

which solicitor they wish to use. They may decide

to use a solicitor already known to them but not

known to you.

The Law Society and the Solicitors’ Regulatory

Authority (SRA) produced some ‘Equity Release

Guidance Notes Nov05’ to assist solicitors. These

Notes state that – “It would be wrong to assume

that equity release schemes only require an

understanding of conveyancing practice.”

The SRA also produced the ‘Solicitors Code

of Conduct’ (see SRA website -

http://www.sra.org.uk/solicitors/handbook/code/content.page ) which includes the

following extract -

Chapter 1: Client care

Outcomes

You must achieve these outcomes:

O(1.4) you have the resource, skills and

procedures to carry out your clients’ instructions.

O(1.5) the service you provide to clients is

competent, delivered in a timely manner and takes

account of your clients’ needs and takes account

of the clients’ best interest.

Therefore the SRA have clearly indicated that

equity release requires more than conveyancing

knowledge, and if the solicitor lacks competence

to deal with an equity release instruction, then

he/she should refuse to act.

It is therefore suggested that, you (the adviser),

with the client’s permission, telephone the client’s

solicitor regarding your client’s intentions as

follows –

� Confirm that your client has instructed you

that they wish to proceed with a lifetime

mortgage where you have made the

recommendation;

� Confirm that your client wishes to instruct the

solicitor to act for them;

� Confirm that the solicitor is happy to act for

the client and that the solicitor has had

experience in dealing with equity release

conveyancing;

� It is also important that your client is made

aware of the fees to be charged for the

conveyancing, and normally these would be

disclosed to the client when the initial

discussion regarding the instruction takes

place;

� If the solicitor is not happy to deal with the

instruction, then you may wish to confirm this

to your client, and suggest that they consider

selection from other options available (The

National Solicitors Network or the Equity

Release Solicitor’s Alliance (ERSA)).

� Once the solicitor is appointed you may wish

to confirm the advice process, the o�er period,

refer to any terms and conditions in the o�er,

and ensure that the solicitor is happy with

completion of the solicitor’s certificate.

� To assist the solicitor with the completion of

the solicitor’s certificate, with the clients’

permission, you may wish to forward a copy

suitability letter, highlighting the paragraphs

within the letter that refer to the points

included on the Solicitor’s certificate –

opportunity to discuss with beneficiaries,

opportunity to discuss state benefits

entitlement with benefitsspecialists, that the

product is suitable for the clients, security of

tenure, a fixed interest rate and the e�ect of

accrual of interest.



Fact find meeting

• If your clients have savings or investments that

could meet any expenditure.

• Your clients’ property and whether they plan to

move or sell their home in the future.

• The potential impact on current/future means

tested benefits.

• Whether they want to retain ownership of their

property or whether a home reversion product

would be suitable.

• Whether they wish to leave an inheritance.

• Whether options other than equity release

might be more suitable for them.

• The impact on their tax position.

• Whether they want to release more money in

the future.

• Whether they have discussed their plans with

their family.

• That they must contact their solicitor about

their plans.

Product illustration

• Contact the lender to request an illustration or

complete online (if available).

• Confirm borrowing amount required and

estimated property value.

• Once created, illustrations and a partially

populated application form can be printed out.

When discussing equity release ensure that you cover:

To produce an illustration:

Adviser Toolkit: Customer Referrals

Summary



Post fact finding meeting

• Talk your clients through the application

process and how long it typically takes.

• Explain the personalised key facts illustration

and explain the features and risks of the

product recommended.

• Discuss which option suits their circumstances.

• Complete the application form.

• Take their proof of identity (birth certificate,

passport, medical card or driving licence) and

solicitor’s details.

• Complete the debit card details for the

arrangement fee and property valuation (if

applicable).

New business submission

• Submit application to the lender.

Your client will receive a call confirming receipt of application and fee, and that surveyors will contact

them to arrange a valuation.

Valuation

• Your clients will be sent written

acknowledgement of their application from the

lender.

• This letter will explain that the valuers will

contact them to arrange a valuation of their

property.

O�er and completion

• Confirmation of your client’s acceptance will

be sent to you by e-mail.

• Inform your client that an o�er will be sent to

their solicitor shortly.

• Ensure your client meets their solicitor and

signs and returns their acceptance form, in

order that we can open their product.

• A letter will then be sent by the lender advising

you that the case has been completed.

• Your fee will be sent by BACS and detailed in

your commission statement.

• Money transferred to solicitors for release to

client.

Most lenders will keep you informed of progress via email, providing confirmation to you throughout the

process, from receipt of application through to completion.

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Adviser Toolkit

Retirement


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Tel : 0844 669 7085

THE EQUITY RELEASE COUNCIL IS A TRADE ORGANISATION THAT REPRESENTS THE EQUITY RELEASE INDUSTRY. NOT ALL

PROVIDERS, ADVISORS, SOLICITORS OR SURVEYORS ARE MEMBERS OF THE COUNCIL. TO MAKE SURE YOU ARE DEALING WITH

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