The delivery of equity release adapts to a changing economic climate
A joint venture between a number of regional law firms, Equishield provides advice about equity release schemes, aiming to offer a professional, personal, and knowledgeable service. The company was founded by legal professionals Simon Wagner and David Bridge, who both provide a wealth of valuable experience, given their backgrounds in conveyancing amongst numerous areas of expertise. In this interview, they tell us about the founding and success of Equishield, as well as market predictions for 2017.
So Simon, David, can you tell us about your professional backgrounds and what made you choose to go into equity release?
DB: “My professional background is as a solicitor specialising in residential conveyancing for over 20 years. Over that time I have seen markets ebb and flow and of course, the entire economy has shifted significantly.
“During various periods over the last 20 years, equity release generally received a bad press and many solicitors were, and remain, unwilling to advise in what is a specialist area. The bad press however whilst being possibly justified initially, is now not really the case as the market and the products available have matured. The lack of firms willing to advise remains however and barring a few larger firms, I felt that there was an imbalance of choice available to clients to obtain the advice that they needed and so we set out to do something about it.”
SPW: “My professional background is similar to David’s in that I have undertaken residential conveyancing work for the best part of 20 years but I also have experience in the private client side of the practice, in particular in Wills, Probate and Estate Planning. As a result of my private client work, I came across equity release in its earliest incarnation when the products were considerably less innovative, flexible and financially viable than they are now. It always struck me as a product with huge potential, but it was not until the establishment of SHIP that equity release gained some much needed credibility and I started to see a marked increase in the numbers that I handled.”
What made you choose to create Equishield? Can you explain to us what it aims to achieve?
DB: “Equishield was born out of a discussion between like-minded solicitors and has taken some time in gestation, but we felt that the time was right now to bring this to the market.
“Simon and I have always felt that there must be a way to offer advice to clients that most need, in a way that works for them and that offers completely independent advice from the financial institutions that create the products. I need to be very clear that we do not offer financial advice and our expertise and advice is limited to the legal aspects of equity release but that is complex enough!
“So what Equishield is setting out to do, is take the likeminded idea of two solicitors further and to include other like-minded firms so that we can offer advice on a truly national basis and ensure that clients have the opportunity to have face-to-face advice with their own solicitor. Equishield is more of a concept than an organisation and an umbrella to bring specialist firms into one place, offering and pooling their expert advice on the same terms and service levels wherever you are in the country.”
SPW: “I concur with David’s comments other than to re-iterate the importance, in our view, of the face-to-face meeting with the clients. Only by meeting the clients can we be absolutely sure that they fully understand what they are doing, are comfortable with the product and the risks, and are not acting under duress or undue influence. This is particularly helpful to financial advisors who have not met their clients.
“I would also add that we would hope that the Equishield members will also be able to offer advice to clients who are borrowing into retirement through secured, non-equity release lending.”
When did the company start up and how does it work for clients?
DB: “As I touched on before, Equishield at present is not a separate company in its own right, but rather a trading style if you will – enabling separate firms to gather together and provide specialist advice. It operates more as a membership group, pooling best practice, service and advice, allowing clients to access the firm that is most geographically suitable for them.”
The equity release market seems to have gained momentum in recent months, can you tell us whether there have been any particular changes which have caused this growth?
SPW: “As equity release has gained in credibility, there have been a number of new entrants into the market over the past few years, culminating in OneFamily in 2016. The additional competition combined with record low-interest rates has led to a number of products that are both keenly priced and more flexible to match borrowers’ differing individual requirements, and this has helped fuel the substantial growth in the market that we have seen over the past 2 to 3 years.
“As well as draw down and lump sum roll up mortgages, we have also seen the advent of interest only and tracker mortgages that have considerably increased the amount of choice. The success of the existing lenders will inevitably lead to one or two of the high street brands also launching products which will give equity release further momentum and profile.”
What’s sets Equishield apart from the rest? Does it offer clients anything unique which would be difficult to find elsewhere?
DB: “The difference is the idea that firms can work together to benefit their clients. There are no panel or referral fees and all our efforts are concentrated on best advice.
“All our members will be members of the Equity Release Council and have a proven track record of offering advice in this area.
“By not being precious and trying to offer clients face-to-face meetings, the members are not treading on anyone’s toes and so can devote their efforts to maintaining the highest standards of client service and independence.”
SPW: “We will not take a case on unless we meet the clients face-to-face, be it at their home, our office or another venue.
“We share expertise and resources and also compliance, which is increasingly important in our profession. All firms also charge the same fixed fee whatever their location so we have consistency across the board in what we charge, the advice we give and the paperwork we use.
“Equishield is still in its infancy and is very much a moving feast. We hope that with the expertise we have between us, it can evolve and we will ultimately be able to offer a broader range of services to clients who want to borrow into retirement.”
Given that the equity release market has gone through big changes in the past few months, do you expect it to grow even more in the next couple of years?
DB: “We chose to bring Equishield to life now because we see it as being more and more relevant to an ageing population. Reasons for taking out an equity release mortgage are as varied and they are for any other kind of borrowing, but the change in demographic and the way the housing market seems to be developing, we see the market going from strength to strength. This is backed up by recent reports and statistics that show a significant increase in loans taken out and interest in the future. The more people that are interested in these products, the more important it is that clients get truly expert and independent advice on how they work and the legal obligations and consequences.”
SPW: “The continued fall in equity release rates has contributed significantly to the attractiveness of the product as a whole and the key policy makers in government have also warmed to it.
“Whilst the average age of people who are taking out equity release products has not decreased to any great extent, we now have a new generation of people to whom equity release is a more acceptable option. They are more comfortable about lending into retirement than the previous generation, but also face a more difficult economic climate that necessitates it for many people.
“The reasons why people unlock equity from the homes are varied, but I have noticed increasing numbers of my clients who are trying to pay off mortgages, loans and other debts into retirement but the pensions are insufficient to cover the outlay. There are also considerably more people using equity release to fund deposits for their children and help them get on the housing ladder.
“I see these trends continuing as household debt continues to rise and house prices are so high. I also see the equity release sector being accepted into the mainstream, with high street lenders entering the fray and more specialist financial advisors too. With more competition, we will see more innovative products, which bodes well for the next few years.”
When it comes to providing legal advice independently, do you have any major concerns?
DB: “No – that is the joy of working with a group of like-minded specialists. By being focused as a group, we ensure that we can really offer the advice that the client needs whichever firm in the group they instruct. This allows us to be confident that we can help where others may feel uncertain and less happy to advise.
“In the end, our clients want to know how they can achieve their aims, and what they need to know before they do so. By working with the now extremely qualified financial advisers, we believe that we can give this advice in an area of law where others perhaps fear to tread.”
SPW: “No. The equity release sector has gone through such a transition over the past few years, helped considerably by the creation of SHIP and now the Equity Release Council, that it is has become a more mainstream product rather than niche.
“No financial products are risk-free and we make the risks of equity release abundantly clear to our clients. If we do not think our clients fully understand what they are doing, or that the product quite clearly does not suit their needs, we would not recommend that they proceed.”
Do you think there are any particular reasons why some firms will choose not to offer equity release?
DB: “I think there are a number of factors but overall it is probably a combination of past bad press and concern about liability. Both these stem from immature products and perhaps some examples where the solicitor was not fully up to speed with the products or did not take enough care to advise of all the consequences.
“Given the age profile of our clients, there are often many considerations beyond the norm that must be taken into account and we feel that by ensuring that where at all possible, all our clients receive face-to-face advice, we can overcome this. In addition, by working with the group, we help ensure that we are fully up to speed with all the products as they develop. Indeed this will be with most of the main lenders so we will know their requirements and have systems in place to ensure compliance. Other firms that are not so specialised and so do not come across these transactions frequently, may feel that they simply are not willing or able to advise.”
SPW:” I agree with David and would add that the attitude of the Professional Indemnity Insurers for the legal sector is a key barometer. Whilst they still view equity release as potentially high risk, they are becoming more comfortable with it as products mature, and financial advice and legal expertise improve too.”