Expert discusses the importance of consumer advertising
advice and misleading promotional campaigns, prompting the removal or amendment of almost 400 promotions.
So, how can consumer advertising of later life lending products play a role in a healthy and growing sector?
Is awareness of the later life market low?
Chris Bibby (pictured), chief marketing officer at Key, said the later life lending market has been handed an opportunity to raise the bar on advertising, marketing, and customer education by the recent FCA report on the sector.
“It is a clear opportunity to build long-term trust and to help ensure good outcomes for customers who may be unaware of their options and missing a product solution that could be a better fit for their needs,” he said.
He said that choices around messaging, creative balance, media channels and lead generation partners must be of the highest possible standard, particularly as customers still have low levels of education and awareness about the product options, as well as the benefits and risks.
Just 21% of over 45s would consider equity release, according to Mintel, the market intelligence agency.
“Specialist equity release firms invest heavily to educate consumers on what is still a misunderstood product, where recent improvements in product flexibilities have often not been reflected in the advice that customers receive in the mainstream mortgage market or through information they get from their existing lender,” he said.
Last year was a record year for lending in the equity release sector, Bibby said; however, at just £6.2 billion of a £50 billion-plus later life lending market, he believes the levels of take-up still do not reflect how modern lifetime mortgages can support a broad cohort of older customers.
The Mintel data found, for instance, that 43% of adults do not realise that equity release can be used to repay an existing mortgage.
“There is still much work to be done, and advertising must remain an important part of the later life lending landscape if the sector is to fulfil its potential,” Bibby said.
How important is it to grow the later life market?
Advertising drives, he said, create a significant halo of customers who then seek advice through their local mortgage adviser or IFA.
Investment in advertising, Bibby added, helps grow the market for all participants and benefits customers too.
“Key’s own econometric modelling suggests that TV and press advertising by the leading equity release brands has collectively delivered 77,000 new customers to the market, amounting to £6 billion of total lending between 2014 and 2021,” he said.
Claiming that the cost of advertising adds to the costs for customers, Bibby added, misses the point in terms of the role advertising can play in educating customers about their options.
In a low awareness category, he said, marketing communications are vital in helping people navigate to advice, when otherwise many would be left without the support they need to address the financial challenges of later life.
“It is equally important that mainstream brokers ‘offer more options’, perhaps putting in place appropriate referral partnerships if they do not want to advise on equity release themselves,” he said.
What standards are required in the later life market?
Bibby said that there are now clearer expectations from the FCA around the minimum standards that need to be applied when marketing these products.
“Communications need to be clear on the downside risks of equity release as well as the benefits, with risks made clear throughout the process,” he said.
It is not enough, Bibby added, to rely on the argument that the advice process explains these risks to customers.
“Compound interest needs to be explained with illustrations that bring it to life; understanding of the true impact on their estate is essential for transparency and trust,” he said.
Firms, Bibby believes, need to talk about the use of repayments to manage customers’ cost of borrowing.
“The old message of ‘no monthly repayments’ must change, as the onus shifts to helping customers better manage their borrowing,” he said.
From a customer understanding perspective, Bibby said it is vital that these products are not seen as delivering ‘free cash’ and that they are recognised as another form of debt, an alternative to a traditional mortgage but still a mortgage.
Greater explanation of product and non-product alternatives, he believes, must be part of the customer communications journey.
“We need to collectively ensure that customers are fully aware of all options and the scope of the advice they are receiving, so that they enter the advice process with eyes wide open,” Bibby said.
Tone and style of communications matter, he said, and great care needs to be taken with lead generation partners.
“Can you be certain where your leads are coming from, and the information journey the customer has been on before they arrive with you? High standards must apply to all financial promotions, irrespective of source,” Bibby said.
Under Consumer Duty, he said, outsourcing your customer acquisition activity does not mean you can wash your hands of the responsibility of ensuring that you understand exactly what journey a customer has been through before entering your advice process.
What is the importance of priming the later life market?
The later life lending market, Bibby said, needs to inform and educate about how home equity products can meet the needs of many consumers in later life.
“It needs to align with specific target markets identified through Consumer Duty and connect the dots between their financial situations and how modern equity release products can provide solutions,” he said.
Bibby believes that more needs to be done to explain how products have evolved and how new products are being developed to meet currently unserved needs.
“Consumer advertising and content marketing will play a significant role in doing this job and can play a key part in a healthy and growing sector going forward, if firms take the opportunity to act and improve their financial promotions now,” Bibby said.
How do you believe the later life lending market can grow? Let us know in the comment section below.