Lifetime Newsletter 0609.indd

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Lifetime Formerly ‘release’ Hodge Lifetime Newsletter July 2009 I id Inside this issue... Advisers boost equity release awareness • A third of all clients are introduced to equity release via an IFA • IFAs determine ﬁnal plan choice in 77% of cases Findings from Hodge Lifetime’s quarterly customer questionnaire (Q1 2009) highlight the increasing role advisers now play in introducing equity release to clients. In Q1 2009 advisers accounted for 34% of all equity release introductions among customers surveyed, a year on year increase of 13% (Q1 2008: 21%), while introductions generated from newspaper editorial and press advertising fell considerably (editorial: Q1 09 – 11%, Q1 08 – 22%; press advertising: Q1 09 – 15%, Q1 08 – 23%). Intermediaries also played a signiﬁcant role in determining customers’ ﬁnal plan choice, with 77% of respondents taking out the plan recommended by their IFA. Advice is now paramount for customer guarantees However, for the importance of IFAs to continue to grow, the additional layers of guarantees that they can ensure for their customers is paramount. Alongside the protection offered by SHIP plans, an IFA in today’s market who has considered the impact of redemption penalties, the need for guaranteed cash facility and rates for life can provide advice to older homeowners that encompasses these guarantees. Jon King, Managing Director of Hodge Lifetime, commented; “The increase of introductions to equity release via advisers is great news for the intermediary market and shows that real opportunities are available for today’s IFA. The extra value IFAs bring is not just in their advice but also their product selection in response to consumer concerns. “With a full understanding of the intricacies of equity release products on offer, IFAs in this ﬁeld can ensure an additional layer of guarantees and peace of mind to older clients.” Proﬁle of a trade journalist Why guarantees matter now more than ever Welfare Beneﬁts for Welfare Beneﬁts for lf Ben ﬁ B Over 60s Win a summer hamper Proﬁle of a trade journalist Gregor Watt, Money Marketing The recent economic turbulence has brought the role of the ﬁnancial journalist into sharp focus. Gregor Watt features editor at Money Marketing shares his thoughts on the subject with ‘Lifetime’. About you... Sum yourself up in three words. Thirtysomething scottish journalist Why did you ﬁrst get into journalism? After leaving university I spent several years in the ﬁnance industry doing various clerical jobs but while they paid the bills, I didn’t enjoy them much. Journalism looked like an interesting job - something that sees being awkward and asking difﬁcult questions as a positive quality not a character ﬂaw can’t be all bad - and having written a few pieces for the university paper thought I’d give it a go. What made you decide to go down the ﬁnancial journalist route? I trained as a general news journalist. When I ﬁnished my training contract and was looking around for my next move the option was either local papers or ﬁnance. I knew something about ﬁnance, the opportunities for career progression looked good and the trade press offers the chance to cover some fairly important stories to fairly junior journalists. The idea of interviewing a cabinet minister on pension reform sounded better than a local vicar at a church fete. What is the most important thing you’ve learnt in your role as a ﬁnancial journalist? Don’t believe anyone who resorts to jargon or acronyms. What would be the one opening night event you couldn’t turn down? An invite to watch the Scottish rugby team in the knockout stages of the world cup. Professionally it’s been quite extraordinary. If I write about ﬁnance for 30 more years I probably won’t see another 12 months like it. Personally not much, it’s hard to get too upset about house prices when you don’t own a house. How did the world change for you when the credit crunch happened? How has trade journalism and story angles had to adapt to the current economic climate? The main issue has been to do with the speed of reporting. The ﬁnancial trades websites have become much more important. Stories that a few years ago would have broken in the paper are now being broken on line and sometimes updated several times a day as the story unfolds. We are also having to brush up on our knowledge of the insolvency courts! What are your thoughts on the retail distribution review? Increasing the standard of ﬁnancial advice for all advisers, not just IFAs, has to be a good thing. If the IFA sector can be seen to be on a level of professionalism equivalent to accountants or lawyers that has to be positive. But as things stand there are two issues with the RDR. First, any attempt to remove commission as an option for paying for ﬁnancial advice could stop large numbers of people getting good independent advice. Secondly, any blurring of the lines between tied and independent advice will be to consumer disadvantage. There is nothing inherently wrong with getting advice from a tied agent as long as you know what they are, how they get paid and the type of service they offer. If you could change one thing about the UK ﬁnancial services market what would it be? Consumers need better education on ﬁnancial services. If people properly understood how ﬁnancial services products work then many of the issues with today’s market would disappear. Your thoughts... How do you determine what is news? For the news pages the judgement tends to be a straightforward consideration of is it new? Is it relevant? How important is it to our readers? For the features pages it can be a little more subjective, as I don’t have space to cover everything. How much of an impact do you believe journalism has had upon shaping the current ﬁnancial markets? This is a difﬁcult question as the answer can be quite a lot and almost none at all. In the case of Robert Peston’s reporting of the crisis at HBoS and the Lloyds merger his broadcasts were having a very real and speciﬁc effect on the share price of several banks. On the other hand the ﬁnancial crisis and the recession were caused by a credit bubble due to reckless speculation by the investment banks and lax regulation. Journalists were merely trying to relay what was happening. Peston’s stories may have been moving markets but the biggest stories, the collapse of Lehmans and the near collapse of AIG were only reported after the fact. Having reported on many potential solutions in your role as a journalist, what do you believe is needed to save today’s pensioners? Scrap means testing and introduce a decent ﬂat rate basic state pension for everyone, linked to wage inﬂation. At the last general election the Lib Dems suggested a Citizens Pension at around £130 a week, so just above the level of means testing. With a sensible and understandable starting point people can then make informed decisions about how much to save before retirement and how to use their other assets and savings in retirement. How do you believe the equity release market can combat its predominantly negative portrayal by the media? If the equity release market can make it out of this housing downturn without reputational damage then it will go a long way to building conﬁdence in modern equity release products. Other than that, further product development would help. Additional ﬂexibility, such as the ability to remortgage an equity release deal or repay it if circumstances change would give people increased conﬁdence in the business. How do you keep in touch with IFAs interests? The Money Marketing readership can be quite good about letting us know what issues are concerning them, particularly through our website. We also have a large network of IFAs who regularly contribute to the paper or who we speak to when researching and writing stories and they tend to tell us what they think about our coverage. Free pocket guide available to IFAs Hodge Lifetime produced an updated pocket guide entitled ‘Welfare Beneﬁts for Over 60s’ in conjunction with Ferret Information Systems Ltd and has received a record number of requests. The guide provides new information on means and non-means tested entitlements including pension credit and housing tax beneﬁt, following this year’s budget where it was announced that the capital allowance on income is to be raised from £6,000 to £10,000 from November 2009. To request your free copy of ‘Welfare Beneﬁts for Over 60s’ please email info@hodgelifetime.com or call 0800 731 4076. Why guarantees matter now more than ever As the recession continues its relentless path I cannot help but notice the peculiarities of peoples ﬁnancial decisions, people will buy the most unit trusts when the stock market is at the top and the least when it’s on the ﬂoor. They will also scramble to pay off mortgages when rates are falling and money is at the cheapest it has been in most peoples’ living memory. The Bank of England reported recently that households paid off £8bn of mortgage debt in the last quarter of 2008 or 3.3% of post tax income. Back in 2006 £13bn a quarter was being withdrawn. However, when individuals apply micro-economic principles in an uncertain macro-economic climate it becomes increasingly important to guarantee their actions and insure against a change in circumstances which could ﬂy in the face of an originally ‘sensible’ decision. In times of relative stability, product guarantees and security can appear as relatively low in order of importance. However, when the market climate changes and future direction is unknown, guarantees come into their own and the safety and peace of mind they are designed to offer should become a necessary additional consideration for all consumers. And luckily for equity release clients, they have many to rely on. Perhaps the most obvious set of guarantees is that offered by the trade body SHIP and those providers that subscribe to its code, the most pertinent being its pledge for interest rates to remain ﬁxed or capped for life and loans never to surpass the value of the property; a no negative equity guarantee. As house prices fall and seem destined to fall further, existing and new Hodge Lifetime clients can take heart from these guarantees, knowing that they will never owe more than the value of their home and their initial interest rate will never increase for the length of the loan. A guaranteed interest rate for life provides absolute certainty in what is proving to be a very uncertain world. Retirement does not guarantee ntee that a person’s circumstances ces will not change and a ﬁxed rate for the length of the loan removes any oves unnecessary worry in the latter stages of life. Further SHIP product promises include the guarantee that clients can move home; allowing customers to transfer their loan directly to another property without incurring any ﬁnancial penalty, and tenure for life. This latter guarantee assures customers that, regardless of personal circumstances, unsettled ﬁnancial markets or an escalating property crash, their right to live in their own home will never be compromised. Such guarantees form the backbone of SHIP’s code of conduct and have been present since the trade body was formed in 1991. However, while these guarantees offer an umbrella of protection to older homeowners, today’s current market conditions call for additional guarantees to be made at ground level by the IFA who advises on the details of the plan. Current equity release planning requires intermediaries to build in additional layers of certainty when advising on the most suitable plan for older homeowners and these layers take the form of product choice. At present, there is a raft of equity release plans available with differing product speciﬁcations and depending upon the clients requirements, it is the responsibility of IFAs to match the most suited plan to their needs. Does the client require a guaranteed cash facility? Does the client require a guaranteed level of redemption penalty to protect them should they wish to move their plan? Do clients want the ability to repay part or all of the interest? All these questions must be asked, and relevant calculations made, before an IFA recommends a plan. And by ensuring that the right plan is chosen the IFA can be sure the client is sold the plan they require and the client is assured that the speciﬁcs of the plan they have taken is guaranteed for their needs. With product guarantees and IFA diligence, clients are two thirds of the way to peace of mind when taking out equity release. The ﬁnal third comes in the form of independent legal advice. Covered in the SHIP code, equity release clients must seek independent legal advice before embarking on their chosen plan. Up to date on all current issues, independent legal advice ensures clients fully understand the implications of releasing equity from their home. This is backed by the signing of a solicitor’s certiﬁcate containing the effect of the plan on a client’s eventual estate. In these turbulent times, it’s good to know that the guarantees put in place by the founder members of SHIP are as relevant today as ever and with the expertise offered by IFAs and solicitors in the ﬁeld, equity release customers’ micro economic concerns are well protected even if the wider economy seems unsettled. Jon King, Managing Director Hodge Lifetime Free surveys for Hodge Lifetime’s Shared Growth Option Hodge Lifetime has experienced a positive start to the year with a 40% growth in popularity of its home reversion product, compared to the previous six months. To help intermediaries capitalise on this increasing demand, free surveys are now available for all clients opting for a Shared Growth Option up to a maximum property value of £250k. Allowing clients to sell between 30% and 90% of their property value in return for a tax-free cash sum, the Hodge Lifetime Shared Growth Option appeals to clients who speciﬁcally require the security of knowing the percentage of their property given up by taking out the plan. For further details about the Hodge Lifetime Shared Growth Option visit hodgelifetime.com or contact our Broker Support Unit on 0800 731 4076 Exam training success Congratulations to all those advisers who successfully obtained the Certiﬁcate in Regulated Equity Release (CeRER) examination further to attending one of our revision workshops. The workshops delivered by Tony Payne of inSynergiUK were speciﬁcally designed to prepare new brokers and advisers for the qualiﬁcation. Sharon Bloomﬁeld, Marketing Manager commented: “As a product provider dedicated er to working exclusively with y intermediaries these workshops support our commitment to ment the ongoing development of pment the equity release market. arket. As equity release becomes more popular, obtaining the qualiﬁcation will help advisers to diversify and develop their business whilst providing much needed advice to their clients in the future.” Impaired life terms – helping you to get the best deal for your client Impaired life products are designed for clients with medical conditions that may reduce their life expectancy. It is therefore important to take a clients state of health into consideration when advising on equity release. Hodge Lifetime offers impaired life terms on all its products so if a client has suffered, or is suffering from a medical condition that will reduce their life expectancy, they may qualify for enhanced terms. No lengthy or expensive medical checks Quick hassle free quotations are available free of charge exclusively via IFAs and brokers. By completing a simple questionnaire, quotations can be turned around within 24 hours in the majority of cases, enabling you to source a suitable plan for your client quickly, with the minimum of fuss. If you are interested in ﬁnding out more about impaired life terms please email info@hodgelifetime.com or contact our Broker Support Unit on 0800 731 4076. Utilising equity release pre-retirement Many pigeon-hole equity release speciﬁcally as a stand alone retirement solution. However, contrary to these beliefs equity release can also be utilised as a viable ﬁnancial planning tool for homeowners age 55+. For example, you may have a client who is considering moving to part-time work but is concerned about maintaining their lifestyle. Equity release could be used to help them supplement their income and give them the freedom to spend more time doing the things they enjoy such as a favourite hobby or spending quality time with the family. Similarly, you may come across a client who has, or would like to retire early – equity release could provide them with a cash lump sum to tide them over whilst waiting for their pension. Equity release is not for everyone but is an option that should be explored when dealing with clients over the age of 55. A leaﬂet directed at homeowners age 55+ entitled ‘Open the door to a brighter future’ is available for IFAs via Hodge Lifetime. The leaﬂet provides a brief overview of the options available and can be requested via info@hodgelifetime.com Everyone is different and so are we Discover the difference a dedicated, ﬂexible service and a range of simple transparent products could make to your business For a free information pack freephone 0800 731 4076, email info@hodgelifetime.com or visit www.hodgelifetime.com Impact of house prices on equity release The decline of house prices over recent times is well documented and rarely a day goes by without an article on the subject being published in the national press. Jon Tweed, National Sales Manager explores the impact of house prices on the equity release market. The average house price in the UK is now £149,709, down 16.5% year on year (Nationwide HPI Q1 2009) and over £34,000 down on its peak (Q3 2007). Though relatively insulated from the credit crunch, according to Safe Home Income Plans (SHIP) equity release plans sold have fallen by 14% (Q1 2008 to Q1 2009) year on year. One of the reasons cited has been the concern of advisers and clients of house price decline and the effect it will have on taking out an equity release plan. Property value is important at two stages of the equity release process – the beginning and the end. The initial valuation determines the amount released and the ﬁnal valuation (redemption) will determine the amount of equity left for the estate. As client life expectancy increases the requirement for ﬂexibility also increases and the type of product recommended becomes ever more important. In 2008, SHIP reported that 55% of equity release plans sold were on a draw-down basis as clients only need to draw-down the amount of capital they require and keep the rest in a reserve facility - taking the maximum is not always required. Indeed the issue is often one of perception with 43% of advisers in a recent survey stating concern that falling house prices were wrongly portrayed as being detrimental to equity release choice (source: Hodge Lifetime Quarterly IFA Conﬁdence Index April 2009). As house prices rise, clients will of course have the option to top up loans. For clients who are not optimistic about future house price increases then a home reversion may be suitable. It allows a client to sell a ﬁxed percentage and provides the option to sell further slices in the future if house prices improve and these further slices will be based on the increased property value. Sales of the Hodge Lifetime reversion product have increased by 40% compared to the previous 6 months. It is worth remembering that as clients face very real issues with increased living expenses and falling savings and pensions, equity release can offer a viable solution for clients looking for security in uncertain times. Competition Winner Congratulations to Leighton Bright of Financial Advice & Services Ltd, Folkestone who was the lucky winner of the speciality trio in the previous issue of ‘Lifetime’. Photographed opposite with James Young, ﬁeld based Broker Consultant for the South, Leighton commented; “I was delighted to win this generous prize from Hodge, which will certainly help me through the current ﬁnancial crisis! I regard the service and support provided by Hodge as amongst the best in the industry and am very happy to continue to recommend Hodge to my clients in the future.” Fax back on 029 2080 3080 by 3 August 2009 Win a Fortnum & Mason summer hamper Hodge Lifetime is offering readers of ‘Lifetime’ the opportunity to win a delightful Fortnum & Mason summer hamper containing a selection of speciality items including champagne, port, red wine, trufﬂes, nuts etc. - all supplied in a wicker basket, perfect for summer picnics. To be in with a chance of winning please complete and return the following fax back today! Do you currently write any equity release business? (Please tick) If yes, which online sourcing system do you use? (Please tick) Name: Yes No The Exchange Assureweb Job Title: Company: Address: Postcode: Tel No: Email: Closing date 3 August 2009. Terms and conditions apply. Full details are available on request from the address below. Fax back on: 029 2080 3080 or email: lifetime@hodgelifetime.com or post to: Hodge Lifetime, 30 Windsor Place, Cardiff CF10 3UR Hodge Lifetime is a trading name of Julian Hodge Bank Limited (Registered in England No. 743437) and Hodge Life Assurance Company Limited (Registered in England No. 837457) which are authorised and regulated by the Financial Services Authority. Both companies are registered in England and Wales at 31 Windsor Place, Cardiff CF10 3UR.