Planners creating ‘value gap’

Financial planners without an understanding of how equity release and reverse mortgage products work could be ignoring this section of the industry at their own peril, according to communications consultant and finance marketing guru Craig Saunders.

Saunders, who will speak at the Total Asset Planning (TAP) conference in Sydney on September 12 and Melbourne on September 21, believes some planners may be leaving ‘value gaps’ that can be exploited by other financial service providers.

“As home equity release grows up, a planner who doesn’t at least have an understanding of it [can] open the door for someone who does to get their foot in the door to your client.”

He thinks mortgage brokers represent a considerable threat to the financial planning industry because of their high level of access to clients.

Rather than operating on a lifestyle level, where planners are focusing on an overall approach to building wealth, brokers of equity release and mortgage products are making it more about tangibles.

“These people aren’t going to be coming in saying, ‘Do you want to be a more effective, productive investor?’, they’re going to come in and say, ‘Do you want to have a new bathroom? Do you want to have a new car?’

“As marketers, they leave planners for dead. They’re really aggressive, they’re really out there and they’ll come to [clients] at all hours of the day and night,” Saunders said.

He explains that most people have two-thirds of their wealth tied-up in the family home, but until now this has been largely ignored by the financial planning industry for various reasons.

“The family home is quarantined off in planners’ minds as something that goes into the will, it’s not something that’s part of the process. The big change here is that now it becomes part of the process,” Saunders said.

Saunders and others advocating the TAP approach argue that this is no longer necessarily the case. “Super changes coupled with equity release mean there is a good argument for not paying off the family home,” he said.

While he is a strong advocate of this, Saunders points out that there are issues that planners need to be aware of when becoming involved in the home equity space.

“I don’t think planners have to decide today ‘do I suddenly become an equity release or an agent for a reverse mortgager?’, But they have to decide what it means for their processes and their clients, and then how they’re going to accommodate that.”