Demand for equity release remains high, but consumers reluctant to accept fee based advice model

New research commissioned by the Equity Release Solicitors' Alliance (ERSA) has found that 12% of UK adults will definitely use equity release to finance their retirement or are likely to, and 20% would consider it. Additionally, 14% of those surveyed say equity release would represent between 25% and 49% of their retirement finances should they take out a plan, and 9% say they thought it would provide between 50% and 74%. If they were to take out a plan, a quarter of people expect equity release to provide at least 25% of their retirement funding.

When it comes to seeking advice on equity release, 35% of people say they would consult an IFA and 26% say they would speak to a specialist solicitor, compared to 22% who would rely on the internet and 18% who would trust family and friends, indicating that consumers still prefer face-to-face specialist advice when it comes to equity release (see table 1).

Table 1: Where would you go for advice you could trust about equity release?

IFAs

35%

Solicitors with specialist equity release experience

26%

The internet

22%

Family and friends

18%

Other

18%

Equity release providers

10%

Bank or building society

16%

Source: ERSA December 2010

An important finding for the adviser community ahead of the Retail Distribution Review was consumers' negative attitude to a fee-based model for specialist advice. There remains a clear preference for 'free' advice, with 59% saying they would not be willing to pay for an hour of advice from a specialist equity release IFA, 56% would not be willing to pay for a specialist solicitor, and 66% would not want to pay for an hours advice from a mortgage broker. In comparison, the value of accountants and solicitors is perceived more highly - just 36% and 32% respectively say they would not be prepared to pay for this advice. Even among those who will pay, consumers show a reluctance to spend more than £50 an hour; just 10% say they will pay above this for a specialist equity release financial adviser (see table 2 below).

When seeking specialist equity release advice 42% of consumers say they thought it was important advisers did not charge an upfront fee, with 42% saying they also thought a free initial consultation and specialist qualifications were important.

Table 2: How much would you be prepared to pay for an hour's advice from the following?

 

£0

£1-£50

£51-£100

£101+

Mortgage Broker

66%

30%

8%

2%

Specialist Equity Release Solicitor

56%

29%

12%

3%

Specialist equity release financial adviser

59%

30%

8%

2%

Accountant

36%

46%

15%

3%

Solicitor

32%

43%

20%

 

Source: ERSA December 2010

Claire Barker, ERSAClaire Barker, Chairman of ERSA, said,

"This research shows that in consumers' minds equity release is becoming a normalised part of retirement financial planning. Significant numbers of people are now expecting equity release to provide an element of their retirement income. It is good also that consumers preference is to seek specialist advice from an IFA for this complex product. However, attitudes towards paying for this advice are concerning and these findings show that more needs to be done to promote the advantages for consumers of a fee-based model of advice.

"ERSA solicitors work on a 'no completion no fee' basis so our clients only pay out of the proceeds of a plan on successful completion. Hourly rates don't apply for us, as opposed to many general practitioners, and means that clients don't have to find money upfront."

- Ends -

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