The next chapter of mortgage advice: Collaboration, referrals and better later life outcomes - Fireside EP 1

 In this episode, Will Hale is joined by Steph Charman and Charlotte Allen to explore what the future of the later life lending market could look like, and what needs to change for it to become a more natural part of wider mortgage and financial advice. Against the backdrop of the FCA’s focus on the future of the mortgage market, the discussion examines the silos that still exist between mainstream mortgage advice, later life lending, wealth and wider financial planning, and how these can affect customer outcomes. The conversation will also consider the role trade bodies can play in bringing different parts of the market closer together, while looking at the practical steps needed to make holistic advice and specialist referral pathways the norm for older borrowers. 

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Transcript

Welcome And The Later Life Briefing

SPEAKER_00 0:09

So, welcome to the next in our series of fireside chats. Where today I'm joined by Charlotte Allen, Chief Risk and Compliance Officer at Key Group, and also Steph Charman, CEO at the Association of Mortgage Intermediaries. Welcome Steph, welcome Charlotte. Thank you. Hello. So we're going to talk all things later life lending.

Silos That Block Better Outcomes

SPEAKER_00 0:29

So, first question I'm going to direct to you, Steph, if that's okay. And I wanted to get your thoughts on what you feel are the key silos that are still holding back the growth of the later life lending market and how those silos, I suppose, are really impacting customer outcomes day to day.

SPEAKER_02 0:48

So I think we have definitely seen some progress. So I think you know, if we go back just even just a few years, I think what you saw is depending on the advisor that you went to, maybe you would then get a Pacific sort of product route. And I still think there is that today. So I'm not going to sit here and pretend that that isn't still happening. I agree. Yeah. But I do think it's better than it was. So I think this this piece around, I'm sure we're going to get into this conversation about holistic advice. I don't know why I decided to do that. Holistic advice, maybe because we haven't defined it yet. And I do think it's around consideration. So I think what we are getting now is advisors, depending on where you are sitting and which camp you sit in, whether you're a mainstream advisor or you're a lifetime advisor, starting to have some consideration across broader spectrums of products. I think we need to look at practical tools to help that become the norm and not the exception. So how do we how do we get that sort of that broader adoption of that approach? Because actually you're quite right, it's the customer that potentially is the one that's impacted. So I think if we all just sit back and go, right, how do we make sure that my customer gets the right outcome for depending on their need, and actually you take away product to begin with, establish the need, and then look at the product solution, I think you get to a you know to a good place. And I'm not saying that we're not doing that today, but I do think there's pockets where we could do better. So if I you want my scorecard, I would say could do better.

SPEAKER_00 2:15

I think that's a really fair assessment. And and Charlotte, you sit in a group role across a business that has a lender, has an advice business, and obviously also has sort of air advisor support services business. So what are you seeing in the market in terms of how structurally the way things are today are still negatively impacting customer outcomes?

SPEAKER_01 2:35

Um I agree with Steph. I think it is improving. We're definitely seeing it whether it's specialists in the uh lifetime sector considering wider options and coming through in the mainstream world, but it's still not moving quick

Consumer Duty And The FCA Study

SPEAKER_01 2:48

enough. And I think we always talk about some of the silos being the regulatory rule books, and I think the regulator will see through the market study, but I think everything they're saying at the moment is don't hide behind that. They're saying consumer duty is is kind of like their um guiding star, if you like, and they're saying we don't want to write new rules, we sh we think the rules already exist that you should already be considering all options. And I think we've got a real danger coming now as a as a wider mortgage sector that people are still continuing to hide behind the silos in the rule book. And I fully expect what the regulator's going to come out and say at the end of the market study is consumer duty absolutely already requires you to ignore the product and think about the consumer outcome. And I think for those advisors, lenders, or whoever it might be, who are still firmly in their kind of narrow lanes and not um pointing out to whether it's referrals or signposting, I think they're probably gonna come up against a bit of a shock at the end of the market study. I don't think it's gonna be what they expect that oh, we're gonna create new rules. I think they're gonna point to hang on a minute, this is already the rule, why aren't you doing it?

SPEAKER_00 3:56

Yeah. So let's so let's let's talk about the market study a little bit because I think it's such a sort of big flagship moment, isn't it, for the sector? And uh I I tend to agree with you, Charlotte. I think we're seeing enough in terms of the language that the regulator is using to have a fairly good idea around where things are heading. So so what would be your advice, or both of you actually, what would be your advice to advisors today to sort of get ahead of the game, if you like, and position themselves

Signpost Every Option Starting Now

SPEAKER_00 4:24

and their businesses for you know what what is going to be the future landscape? What what are what are the one or two things that you think advisors should do?

SPEAKER_01 4:31

I think they have to start now. I think they absolutely have to start now thinking about what's right for their consumers and and where are the gaps in their product ranges. So no not waiting, but absolutely if you're not gonna advise on lifetime mortgages rehears or whatever it might be, or vice versa, if you're not gonna advise on mainstream mortgages and you only do lifetime, you've absolutely got to be at least signposting, excuse me, at least signposting all options. You just cannot afford to wait. And and I I don't personally think it means coming to holistic advice that everybody's got to be qualified to give advice on everything, but you absolutely have to be raising awareness of all the options, which is just like we do. From it, you talk about me being in a group role with an advice business, we've been considering all options for years. We can't people can't afford to wait. So, that first and foremost is make sure you've got the full product range at your fingertips to at least start making people aware of those options.

SPEAKER_00 5:26

And Steph, from your I mean, Amy represents a broad church of different advisors and businesses, and you know, as much as we sort of like to um talk about the importance of the later life lending market, it is only a subsection of what your membership do. So, how can you sort of help advisors tune in to I suppose both the risks and the opportunities of not doing this properly?

SPEAKER_02 5:49

Yeah, so I I totally agree uh with the point Charlotte's made. I think I've been talking now for a period of time around actually as a sector, as industry, we know the answers. So, actually,

Trade Bodies Build A Shared Roadmap

SPEAKER_02 6:00

if we were really to sit down and say, what do we need to do today? We don't need the regulator to make a massive amount of changes. There are some things in the in the rule book that we do need them to look at, and one of those things is is retirement interest only, which doesn't work as it is today. It's not a future fit, and we're seeing them already looking to address that as part of the the mortgage rule review. So we're already starting to see some see see some change from the regulator. So we need to take it upon ourselves, and I think that's around collectively coming together where we can to have those conversations as a trade body. Some of that is how do we how do we lead, how do we again be that sort of direction of travel to say this is what we think good looks like. Um, but we can't make that change. We we are the facilitator of the conversation, it's then for businesses to take it upon themselves and go and make the changes that are needed. Um, and we've been doing a huge amount of work across, you know, across sector with the likes of you know the likes of Key Group and and the other trade bodies to start to build what that direction of travel could look like.

SPEAKER_00 7:01

So just talk a little bit more about that collaboration because without sparing your blushes, I think you've shown some amazing leadership actually in bringing the trade bodies together to at least start the conversation. So a lot of our members probably w won't be aware of that. So just bring that up to life a little bit in terms of what's happening here and now to to start sort of working out what those answers are.

SPEAKER_02 7:24

Thank you. Um well thank you, that's very kind of you. So I think for me, you know, this is this is a sector I'm passionate about. So, you know, and the figures you showed earlier, actually, you know, we we may talk about sort of 3.8 trillion, but then we come down to a 2.6 billion market for for lifetime and 60 billion for mainstream. Actually, we need to put those two together so we don't need to keep talking about it separately. So maybe that's one of the things we need to do. We need to start talking about it together. But to showcase some of the work, and a lot of the work that we do as trade bodies is behind the scenes, so it's not always seen. So thanks for giving the opportunity to talk about it. But what we've looked to do is work with the regulator. So again, having these open conversations with the regulator, what's the direction of travel they're looking for? And they've been quite open around, they don't actually know, they don't have all the answers, they don't exactly know what this roadmap for holistic advice definition should be. Um, and then what we've done is come together, we've brought together a whole host of sessions with the Equity Release Council, with the other trade bodies that UK Finance BSA and key leaders across the sector, so whether that's distribution, whether it's advice firms, whether it's tech, whether it's lenders, mainstream lenders, equity release lenders, how do we all come together to actually put all of the issues on the table and then say, right, okay, to my point just a moment ago, which ones are for individual businesses to take away and solve, and which ones are there for us to then take forward? So we're starting to do work on mapping out what the advice lifecycle looks like. What does a customer journey look like as they come into later life? And that continued lobbying back on anything that's coming through around disintermediation or removal of advice actually is really, really important as we come into this later life sector. As I've talked a lot around actually, a first-time buyer needs advice throughout the journey because first-time buyers end up in later life.

SPEAKER_00 9:10

Well, as a as a board member of Amy, I feel I'm able to give it a bit of a plug. And I I I think I think what I'd say is for all of our members who who may be members of the Equity Release Council, but actually I'd encourage members also to look at joining Amy as well, because I think it actually you use the the language of trying to get us all to sort of come together and think about ourselves as one market, not as separate markets. And one of the things an advisor can do to practically live and breathe that, I think, is to join Amy and benefit from the services that Amy provides. So we'll we'll certainly make sure our members receive a link so that they can sign up to Amy as part of part of this as well.

SPEAKER_02 9:47

I was just going to say, and also there's broader considerations as well, isn't there? So, you know, Amy, we've been doing a huge amount of work in the protection space. The regulators really focus on protection, so they're not they're not letting us off the hook on either side, mortgage or protection. And there's a protection lens here as well. So again, so thank you. So yeah, I would 100% say, you know, please join Amy, see the work that we do, because actually there's a huge amount of work that we we do do, and we can support firms as they step into broadening diversifications of the sector from a regulatory perspective, which supports the work that you're doing from an air perspective.

Life Stages And Early Course Correction

SPEAKER_02 10:20

Absolutely. And to support members with their proposition.

SPEAKER_01 10:22

And I think that's it, because if everyone has to come together, because we need to think of this as the customer journey, not as a binary everybody enters retirement at a certain point, plus 55 being eligible for certain products. I think we've got to so if you talk about what can individual firms do, they need to think about the different life stages that the consumers are going through. And therefore, you're tailoring your advice specifically to somebody's own personal journey, not tick, they've now hit 55, they're eligible for this. It's to your point, first-time buyers are going to end up here. What if they're taking mortgages that are running for 40 or longer years, what's the outcome at the end of that? Have they are they actually going to pay it down in that period, or do they need a vehicle that's going to get them through the later stages of their life that they need to be thinking about much earlier than actually what the regulatory framework says at the moment, as well as the different kind of constructs of the sector?

SPEAKER_02 11:16

And I think we're we're seeing a very and what we don't we don't know what we don't know yet either, because actually we don't have the data just to really clearly see what a first-time buyer who's taking a 35, 40-year term, is actually going to do. Um, but I can take the practicality from what we're, you know, the practical real life examples of what our advisors are telling us, which is when they have a conversation around, okay, so you've had a pay rise or you've had a promotion and they're being that critical friend, they're positively challenging. Actually, could you start to pay down a little bit? Could you make some overpayments? Do you need a third holiday? Yes. Do you need a third holiday? Could you, you know, could you overpay on your mortgage? Those conversations happening, and I think that's one of the things that we're we are really concerned around, you know, more consumers making decisions on a digital app, nobody's having that positive challenge conversation, and then we are kicking the can down the road. Yeah. So it's great that we're going to have all of these solutions at later life, but actually we need to make sure that customers are fully aware of all of their considerations and solutions throughout their whole mortgage life cycle, not just saying, well, they take a mortgage here and they make those payments all the way through, and then ah, now I need a later life solution. So just got to be a bridge.

SPEAKER_00 12:24

I think I completely agree. And just bringing that all together, I think Charlotte, you know, talking about those life stages. I mean, for me, that sort of um needs to run in parallel parallel with holistic advice, because again, you need to be having those conversations all the way through that mortgage journey. Like you say, Steph, when to overpay, when when to underpay, what that means in terms of other retirement planning considerations that you may have, it all needs to sort of work together, doesn't it? But but this, Charlotte, coming back to this concept of holistic advice, because it you know, again, it's this term that's banded around, but I don't think anyone quite understands what it means

What Holistic Mortgage Advice Means

SPEAKER_00 13:00

in reality. What does it mean to you, Charlotte? In terms of sort of, I suppose, advice businesses who are I say getting it right, but but but but are sort of really tuned into this holistic conversation and have got mechanisms in place to make sure it's delivered. What do you see as good practice at the moment then?

SPEAKER_01 13:18

So fundamentally for me it's holistic mortgage advice, so it's not creating this unicorn advisor who can advise on everything in terms of retirement planning, mortgages, investments, everything. This is mortgage advice. And I think it's not necessarily that you're even qualified to advise while there are separate regulatory regimes for qualification, who knows if that might change. But it's not saying that everybody has to suddenly re-qualify and be able to advise on lifetime mortgages as part of the the overall kind of suite of products, but it's at least having awareness of what all of those options are, so that regardless of what advisor you're speaking to, you're gonna find a route to the right outcome for you, even if that advisor can't actually help you directly. And I think that's what good look like. I mean, don't get me wrong, I think in an ideal world you should advise on all, actually. I think if you're truly going to give holistic mortgage advice, you qualify to give regulated residential mortgage advice, you then onward qualify to do lifetime and everything else that comes with that, and you should do the end-to-end of mortgages because they are so similar. Yes, there are different risks and different impacts and terms with a lifetime mortgage, but they all start with the concept of what can the consumer actually afford to repay, and then that opens up your product range. So I think I do think that should be where people aim to get to, but I recognise that some may not go there.

SPEAKER_00 14:39

Yeah, I I suppose I've got a slightly sort of more nuanced view on that. I think for for me, if you're an advisor who is making the decision to concentrate on over 55 customers, and that's the cohort of customers you're going to specialise in, I think it's very difficult not to operate a holistic model and consider the full range of options if that's where your chosen special is. If I'm a mainstream advisor and I'm maybe focused on first-time buyers or new build, or then I don't think it's realistic for those advisors to cover the whole spectrum. And that's where I mean, Steph, you and I have talked about this many times, but I'm a passionate advocate of referrals. I mean, you've in former

Referrals Plus Tech For Continuity

SPEAKER_00 15:20

lives you've seen it work really effectively in protection or in second charge or bridging. You know, isn't that the mechanism that gets us to a better market? I think so. I think you're both right.

SPEAKER_02 15:30

I think that's part of the problem, isn't it? I think so. I think I I and but I do agree with you. I think if you are a mainstream advisor and your business model and your client bank looks like X, and it, you know, and most of that is, you know, you operate in that new build first ownership as a really good example, you probably aren't going to come across that many cases. And then you so what you've then got then, if you do have a qualification, you've got a competency concern around how do you keep your education awareness up. I think we need to start somewhere, and I think what we've seen, and protection is a really good parallel. So what I've seen in in previous lives is actually you start with recognising the needs, you start with the positioning and recognising the need, and then you have a referral relationship, and actually as you get more confident with referring and having those conversations, actually you might then say, actually, I might want to step step into this. I want to provide actually I see that you know I've got a larger cohort of customers who need that, you know. I think everybody needs protection, but a larger cohort of customers that need protection as an if we're using that as the parallel, and I think actually then you can translate that across here to say actually you might start with a referral ecosystem, um, and that could be within your firm or it could be within a group of firms. Could it be that actually it's a firm that you use for, it could be that it's your you know the IFA wealth firm that you use, they might have that. Um, or actually just broader the broader. I think we do need to get comfortable with referring, yeah, and I think that's always the biggest barrier that we see, whether it's seconds protection or or here. So I would say take time to understand the business that you're referring to, meet them, see what their customer journey looks like, go through that journey yourself, put yourself through it. Um, are you comfortable with that? And where can technology help us? Yeah, I think there's a huge amount that technology can do to help us with track, you know, the transmission of data where GDPR allows to allow for a more seamless customer journey. So that customer's not starting all over again. That's not what we want here. We want a customer who sees an advisor, that advisor recognises a need, recognises that they can't help them, a bit like a G, we use the GP analogy quite a lot. And then how does that, you know, how does that translate over? But all your medical records, all of your details go, you know, go forward with a positioning of where can you start that advice journey again?

SPEAKER_01 17:46

I think it's that's really important about the whole due diligence of who you're working with on the referral side and some of the conversations we've been having certainly are the are the the lenders wanting from an advice perspective, the lenders wanting to understand that we're putting customers at the heart and that actually we're thinking about what's right for the customer. And I think there's also a journey across different regulated sectors to really learn about the lifetime mortgage sector and move on

Leaving Old Equity Release Myths

SPEAKER_01 18:10

from maybe the perceptions of the past. And and at the um at the UK Finance Growth Summit yesterday, Nikhil Rathey said a brilliant comment which I loved, which was we have got to get over the scars of equity release of 20 years ago. It's not the same as it was then. And and his point was, and he actually said the FCA is completely committed to making sure that this sector is ready for growth because they full fundamentally accept more and more consumers need to access their equity to achieve um good standards of living in retirement. So I do think there's an element there that firms who are maybe slightly wary of moving customers into this world need to educate themselves as to how it has evolved because it has evolved significantly, and we can't keep hiding behind the perceptions of 20 or so years ago when that is just not the reality anymore.

SPEAKER_00 18:56

Yeah, I've got to say, I mean, I still shock sometimes engaging with mainstream mortgage advisors or actually particularly wealth managers and IFAs. So you talk about equity release, and they're describing a product set that hasn't been around for 20 or 30 years, you know, thinking about home reversion plans or you know, other sort of varieties of equity release, where modern lifetime mortgages are very akin to just the standard mortgage, you know, repay some all or none of the interest, flexible early redemption charges. So we've got to get better at educating, I think, haven't we, as a sector?

SPEAKER_01 19:30

I mean we've got to want to hear it as well then, and I think that's where it comes back to the regulatory point about consumer duty. Why are people waiting for the regulator to do a market study that's going to find there is a gap and going to force the regulators to take action? Why would we want that? Wouldn't we just want the regulator to find actually there's good practice across the board and we are delivering good outcomes for customers regardless of what part of the sector we're currently operating in?

SPEAKER_02 19:54

But I think that I think that is where we are seeing that progress. So I I am definitely seeing more firms wanting to diversify. They're looking wanting to make sure that they have that broader suite of products available, having those referral mechanisms in place if they're not able to support. I do think qualification reform will be quite interesting here. So actually, if we look at it was a long time ago that I took my CMAP, but if you actually look at CMAP, there's not a huge amount of that later life in there. So where do we don't and whether we get to two sets, still two technical qualifications altogether, you know, again, question mark on on where that goes. But I do think there's a piece here around, you know, even just the equity release qualifications, you know, again, a while since I took that, but I think 40% of the paper was about home reversion schemes. And it's like, so again, if you are stepping into that, you know, well, that that might be, you take an exam, that might be your your understanding. So I think there's work across sector for us all to do, and that all of those pockets coming together to start to build a different picture, to paint that picture for people, so they get a different first impression is really important.

SPEAKER_00 21:00

So so just before we uh bring the session to an end, just one final theme I wanted to

Qualifications And Sensible Product Innovation

SPEAKER_00 21:05

explore, which is product innovation. So uh I I was probably quite surprised actually that sort of product innovation sort of formed such a key part of what the FCA were saying in their in their market study. So maybe starting with you, Charlotte, just I just wondered what what you thought was the sort of opportunity around product innovation in this market and and sort of whether it's needed, I suppose.

SPEAKER_01 21:27

Uh I was surprised as well, actually, and I think that's part of what the market study is trying to explore is what innovation is going to come through. But I don't actually think there's a great need for it. We we've already got products today that don't require any repayments, require can allow partial repayments on an ad hoc basis, it can allow partial repayments that get you an interest discount. So I think there is quite a range today in the product set, and I actually think from an advisor perspective, a lot of advisors are saying we don't need more product innovation, we've got enough things to be thinking about, we've got enough to meet consumer needs. So personally, I don't think there is a need for massive product innovation right here and now.

SPEAKER_00 22:05

And Steph, on your side, because you're talking to again to a lot of mainstream mortgage advisors, they would point to some of the innovation we've already seen in the mainstream space with some of the building societies extending lending to older borrowers, some of the Rio lenders as as well. So do do you see the same need for product innovation?

SPEAKER_02 22:22

I think I think there's tweaks around the edges that are needed. So I think Rio, as we know, isn't really future fit. Then we do need to look at the the stress test around that, and we know that's coming up in a consultation at the SCA. And that's where the SDA can help us. So actually, so I do think the I I sort of saw the product innovation piece when the regulator was saying, is this where we're helping or hindering? And I think there's there's definitely a a piece there around actually are there things in the rule book that actually is hindering product innovation? Is there a way that we can use products to bridge the gap between the two? Because actually it could be that you need a mainstream solution for X period of time, um, and then maybe a lifetime type solution type solution could bridge could you know could could take you on. So, how do we bridge the gap there? How do you actually say that's your repayment vehicle? Potentially, I don't I I don't know. So I think it's my my summary would be it's tweaks around the edges. I think what we've got, what we need to be careful of is not making it so complex that actually then it just becomes you know onerous to get into because we don't want that to be a barrier. Um but I think if we if we do nothing else but just make sure that anything that we're designing from a product perspective is meeting a consumer need. So I suppose there isn't just a question mark on could a consumer need the change? We don't know, we don't quite know what's going to be 10-15 years. So actually just make that's just make sure we've got a regulatory rule book that allows that flexibility if we recognise that actually the needs of our consumers is adapting.

SPEAKER_00 23:48

Yeah, I I I could completely agree with both of you. When I look into the later life lending market, the amount of product choice which is available is huge, and the innovation we've seen over the last five to ten years has been immense. So look, there's definitely room always for more innovation as customer needs evolve, but for me it's that distribution piece, it's breaking down those silos that will be the route to better outcomes and a more vibrant and and growing market. So thank you for your time. It's always great to sit down with the both of you and talk about the market. So thank you very much again. And um I expect in a year's time we'll be facing into uh a very different landscape. Thank you.