Advisers mustn’t ‘hang themselves with the rope’ on RIO

To advise on RIO products brokers don’t require an equity release qualification, though some lenders do require the qualification.

Advisers mustn’t ‘hang themselves with the rope’ on RIO

Retirement interest-only mortgages are an opportunity but advisers shouldn’t ‘hang themselves with the rope’ they’ve been given, Stuart Wilson of the Later Life Academy said at FSE Midlands in Coventry yesterday.

To advise on RIO products brokers don’t necessarily need an equity release qualification, though some lenders do require it.

Wilson said: “RIOs are an opportunity but we have to make sure we don’t take the rope we’ve been given and hang ourselves with it.”

He added: “I think it’s fair to say that I was affronted by the initial RIO proposals.

“But there is an opportunity here if advisers look at the clients and their needs in the round, after all the demographic for RIOs is exactly the same as for equity release.

“In that sense, why shouldn’t we be looking at a more robust legal and benefits process for potential RIO customers?

“And that goes both ways – it’s as true for mortgage advisers and equity release as it is for equity release advisers reviewing RIO/mainstream mortgage options.”

Wilson said he was loathe to suggest this was a problem that could be solved by advisers needing to secure more qualifications as “competency was far deeper than just exams and having certificates on walls” however added that “if the adviser is going to stand up to potential scrutiny in the future about the recommendations they have made, then they have to ensure they’ve been looking at the right customer outcomes”.

Gary Webster of Equity Release Supermarket agreed that advisers needed to be careful they were taking all product options into account when dealing with a later life client.

He said: “The problem we have at the moment is that it’s difficult to say where RIOs fit.

“The carnival has yet to start and there are lots of opportunities for more building societies and larger lenders to enter the sector.

“We do see the opportunity for advisers as a cascade; so a borrower coming off an interest-only mortgage could be put into a RIO this time because, for example, a lifetime mortgage can be quite restrictive in terms of ERCs, but afterwards the adviser can review and look at the equity release opportunities for the client.

“The good thing is that RIOs have created competition and that’s good for consumers. RIOs will grow the equity release market because it will bring more people into the market.”

Jim Boyd, chief executive of the Equity Release Council, agreed that “advice is everything” and that advisers should “be aware that certain RIO products are execution-only, and equity release products should be right at the heart of the solution as well.”