Equity Release

RogerPang

I didn't see the TV programme earlier this week, but heard that Martin appeared at the end and was very negative about the concept of Equity Release(?)

Sure, the cases mentioned on the TV were scandalous, as they were sold back in the late 80's when there really were Equity Release problems.

But since then with SHIP (Safe Home Income Plans) and regulation of Lifetime Mortgages and Home Reversion Schemes (from 6th April 2007), Equity Release seems to have cleared its name.

Sure, there are alternatives that must be looked at first (such as downsizing, local authority grants, etc.) and pitfalls as with any financial product (e.g. impact on state benefits, reduction in potential inheritance for kids), but Equity Release can be a real boon to customers who are typical of many in retirement - i.e. cash poor, asset rich.

Just wondered why Martin is apparently so against Equity Release, as, in the right circumstances, it can drastically improve people's lives in retirement??

- Roger

toonfish

I agree, it is one of th emost underused financial planning tools in my opinion. Unfortunately it was abused in the past, eg borrowing to invest elsewhere with the promise of high returns, but for improved cashflow, helping out your family or inheritence tax planning it can be excellent

AndrewSmith

It is like everything to do with financial planning.

There are many tools and strategies that can be employed in financial matters to optimise one's situation based on what the driving need for the client is. By that I mean whether the client has a need for income, for example.

What has happened in the past is that the wrong tool or strategy has been employed for a given situation thus not effectively being the correct advice offered, and leaving the client somewhat 'disadvantaged'.

Like everything in life, if the correct tool is used for a certain job then all will most likely be well.

After all you wouldn't try to pull a touring caravan with a Smart car now would you?

dwight-van-man

The key problem is that the media are absolutely desperate to find 'the next big mis-selling scandal' and many key figures in financial services along with the FS trade press themselves actively encourage this, hence programmes like this which use out of date reference material and do not fully differentiate between the various product types available. Good news doesn't get ratings....

Rick62

And you think Equity Release is positive? In a very few cases equity release will be the right thing, for some very old people, those needing money for medical reasons, those with no dependants they want to leave anything to and as part of inheritance tax planning for some.

However, for most people it will not be the right solution and my concern is that those who sell it will be keen to recommend it (or they get no business) and will be keen to recommend people take more than they need. You think the examples shown on the program can't still happen? I agree the first couldn't, but the last one (daughter finds she ain't getting half her parents £650k house because her dad signed it to the bank) will be increasingly common.

JoeK_3

Rick62 wrote: »

And you think Equity Release is positive? In a very few cases equity release will be the right thing, for some very old people, those needing money for medical reasons, those with no dependants they want to leave anything to and as part of inheritance tax planning for some.

However, for most people it will not be the right solution and my concern is that those who sell it will be keen to recommend it (or they get no business) and will be keen to recommend people take more than they need. You think the examples shown on the program can't still happen? I agree the first couldn't, but the last one (daughter finds she ain't getting half her parents £650k house because her dad signed it to the bank) will be increasingly common.

It's dangerous to generalise and tar everyone with the same brush.

We have been able to arrange equity release schemes for years but have only done three in ten years. For the needy and old, they can be heaven sent, as it can be the difference between eating and paying the bills or sat in front of a one bar fire trying to keep warm.

Yes we have to learn from the mistakes made by lenders in the past but remember that one swallow does not mean that it's spring.

JoeK

EdInvestor

Rick62 wrote: »

I agree the first couldn't, but the last one (daughter finds she ain't getting half her parents £650k house because her dad signed it to the bank) will be increasingly common.

So what?

It's the parents house, they bought it with their money.If they don't want to move but prefer to raise extra cash by doing equity release, why shouldn't they?

In this case, they have obviously considered the daughter's hypothetical interest, as 40% of the other half would go in IHT anyway.

What gives the daughter the right to complain?Is she concerned about her parents' wellbeing? Or is it just sheer greed?

Advisors should focus on the needs and wants of their actual clients, not those of their grown-up children.

toonfish

every equity release we do invloves those who may potentially inherit - I have never had one case where the children are opposed to it and the benefit to the client is clear.

There are inevitably some greedy parasites who would rather the parents die in poverty than live to the lifestyle they have earned though.

Mr_helpful

"Advisors should focus on the needs and wants of their actual clients, not those of their grown-up children."

We do . that is why a full fact find is done with the client and not just jump to conclusions as is so prone to happen on these boards. Many though not all do not like the idea of working for 40yrs plus and then finding the state gets everything anyway. If we wanted to live in a 100% tax society we would have not have fought so often for freedom.
In many cases there are ways of beating the system by legal means of which one or two have been outlined.
Financial advice is about more than needs it is about wants as well!