New research conducted by LV= found that financial professionals believe reverse mortgages are set to become a big growth area for their business.
Using information gathered during its road shows in the United Kingdom, nearly all (98%) believe there will be a surge in consumers using equity release products over the next few years. In fact, 35% of the IFA (Investment Financial Advisors) that attended said the product is already a core part of their business. Financial advisors said a shortfall in pension provisions will be the driver behind the growth.
”Advisers can clearly see the importance property will play in people financing their future in and around retirement, and a large number of IFAs now class equity release as core to their business,” said Vanessa Owen, LV=’s Head of Equity Release. “Releasing the money locked in a home can, under the right circumstances, be a lifeline for cash poor, asset rich people in or at retirement.”
When looking into long term care planning, 88% of IFAs indicated that they believed, in the right circumstances, equity release could be the best option for people needing to fund long-term care in the home.
Andrea Rozario, Director General of equity release trade body SHIP said it isn’t surprising that advisors believe in the future growth of equity release products considering the longevity issues we face and the problems this brings.
“Clearly the shortfall in pensions, along with an increasing need to pay for care in later life is becoming more important for the consumer and turning to their biggest asset, often their property is a logical step,” she said. “The use of this asset can help alleviate problems for customers as long as they are fully aware of all the options open to them and this is where advisers play a critical role.”
The results from the LV= survey show that financial advisors from the UK have a different outlook on reverse mortgages than their counterparts in the United States. Most financial planners see the product as a last resort, not as a retirement tool.
“It is still the Wild West, but over time, I believe competition and/or regulation will help reverse mortgages,” said Barry Glassman, president of Glassman Wealth Services LLC, a $300 million advisory firm during an interview with Investment News. However, his outlook is far more positive. “Until recently, reverse mortgages seemed like desperate measures, but they will become as common as immediate annuities,” he added.