The modern retirement market requires solutions that cross all advice areas to deliver the best outcomes for clients, writes Bob Champion – and without pushing costs beyond their reach
On the day the Council for Mortgage Lenders’ (CML) report on later life lending was published – Later Life Borrowing – New Mindsets: Old Silos – an interesting article from the Miami Herald came to my attention.
The piece was based on an interview with Kevin Neal, the founder of a Florida-based enterprise called Moenio. The firm matches investors with the financial advisers who will be most suitable to their client’s needs – and while the client then pays Moenio, the financial adviser gives the advice.
Apparently Neal came upon his business idea after sitting in on meetings between financial advisers and their clients. He came to the opinion clients were not the best-equipped individuals to find the adviser that would best suit their needs.
Neal thus went on to develop a process that selected the adviser Moenio would appoint to serve the customer based upon 16 different criteria. He maintains he only uses quality advisers but, as he is dealing with high net worth clients, an adviser who is ideal for one client may not be the best available for another client.
So what, you may be wondering, do high net worth investment clients in Florida have to do with later life borrowers? Well, the CML report covers the fact that most advisers in the later life lending market are either mortgage or equity release advisers. Unless an adviser covers both sectors, their clients may not be given the opportunity to consider the full range of solutions that may be available to them.
The report highlights this one issue but the problem goes wider. The report does not consider downsizing or the subsequent investment of part of the proceeds; nor does it cover the rearrangement of pensions and other investments as alternatives to borrowing in later life. This brings in a whole new raft of specialist advisers.
Later life borrowing is being used more frequently for estate planning purposes these days. Clients are using their pensions for inheritance purposes and drawing down on their assets. Then there are care-funding solutions that may involve borrowing against the home.
The CML recommends the new single financial guidance body should have a role in signposting who can advise on both equity release and retail mortgages. While this would be an improvement on the current situation, I do not consider this to be the ultimate solution.
We cannot expect advisers – whether they operate in the mortgage, protection, care, equity release, pensions, investment or estate-planning markets – to be fully up-to-date with all developments affecting financial services. Just look at the number of changes introduced each year by Finance Acts and regulators – and that is without any product innovations. The adviser also has to ensure their business remains compliant with other regulatory requirements – for example, data protection changes.
A client’s needs often fall cross a number of those areas. The client could be looking for a retirement income solution and need to weigh up the alternative options available to them using pensions freedom alongside later life lending or else downsizing.
Across the disciplines
We all object to those who obtain their financial advice from a friend down the pub but where is the help for those who need to weigh up the wide range of options available to them that cross disciplines and point them in the direction that is most suitable?
When an individual approaches retirement, they need to understand four things:
- Themselves, their responsibilities, needs and desires;
- What they have that will finance ‘1’ above;
- The actual solutions ‘2’ above will enable to deliver ‘1’ above; and
- The products – in the widest sense – that will best deliver ‘3’ above.
This is a different type of client to the one Moenio serves. But those clients need someone who can help them analyse and co-ordinate the solutions that are most suitable to them. The person who fronts such a service could be the gateway to a panel of experts, co-ordinating those advisers who are needed to deliver the specialist advice that will be required to service the customer’s needs.
Large advice firms that wish to move into the mass advice market can structure themselves in such a way as to deliver this service. Smaller organisations need to consider whether they are going to be a generalist – in which case they need to build an expert support network. Alternatively, will they be the expert advisers who will support their generalist colleagues?
While welcome, the CML report is only a beginning. It takes two ‘silos’ and creates a larger one. In the retirement market, we need solutions that cross all the silos to deliver the best outcomes for our clients without pushing the cost out of their reach.
Bob Champion is chairman of the Later Life Academy
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