Cover all bases when considering debt consolidation solutions
“We not only need to be fully aware of the seniors loan industry and the solutions it offers, but also what consumers could potentially get elsewhere.”
The end-of-life lending market continues to build the strongest foundations, with equity release, RIO, mortgages for older borrowers all continuing to show strong and significant growth. Those demand fundamentals that fuel the sector are also unlikely to change either; in fact, you could very strongly argue that they will only gain ground over time.
I recently looked at our own activity levels and business is, like the weather recently, hot, up 38% on the same time last year and shows again how – when it comes to of older borrowers – advice is absolutely fundamental, and advice is sought out and taken.
What we need to be very aware of though, and it’s something we’ve continually emphasized, is the fact that customer needs don’t lie in some sort of product vacuum. And, because of that, we not only need to be fully aware of the senior loan industry and the solutions it offers, but also what consumers could potentially get elsewhere.
I know that for the most part advisors do this, but at a recent “Breakfast with Stuart” meeting the issue of equity release as a solution to certain client circumstances was raised, particularly in relation to its use for debt consolidation.
Now, of course, debt repayment has been a primary reason for many people to purchase equity release products for many years. Historically, many clients have used capital release, for example, to pay off residential mortgages, particularly when lenders have come to ask them to settle those mortgages later in life, or perhaps when the term of their contract interest only ended and they needed the money to repay the principal.
However, it would appear that with more clients using equity release to consolidate debt, some may be concerned that they have not explored all of their debt management options before deciding on this line of debt. conduct. Now we have to point out that advisors can of course recommend lifetime products if the client wants to use the freed up equity to repay their debt, but you certainly need to be clear about that recommendation, why it was appropriate and, in fact, what other areas you have considered. .
Indeed, when it comes to debt consolidation, the argument is that the counselor should refer the client immediately to a debt management agency/counsellor and let them talk to them first. However, not all clients want to go this route, and depending on who they turn to for help, getting an appointment can take time.
So, of course, advisors will want to help clients in these situations and they will want to help them as soon as possible if there is a time imperative, but this can often be a complex situation, and advisors need to make sure that they cover all the bases and tread carefully here.
For example, are there other options available to the client rather than borrowing/releasing equity? Could they instead access their pension pots to pay off the debt? Could they use their state pension? Do they not have access to the benefits to which they are entitled, which could help pay off debts?
It is extremely important that all other options are considered and, more importantly, that client records and documentation explicitly describe these considerations, what they were, how they might work and, in fact, why they did not. not deemed appropriate if you switch to an equity. release/loan recommendation later in life. In addition, of course, you must also show that the client has understood all aspects of this process, as well as the reasoning behind your advice and recommendations.
Let’s be honest here – end-of-life counselors need to show their full workings with every client, especially when there might be other potential solutions outside of the industry. In these specific cases, it would not be bad to establish a solid relationship with a debt counselor in order to offer at least a possibility of help and support to the client.
Of course, timing will be everything here, but what you definitely want to provide them with is peace of mind for them and peace of mind for yourself that you made the right choice by opting for the use of capital release or loans later in life for this purpose.