John Moriarty: There is an ever-present appetite for equity release in Ireland
John Moriarty, Director at Seniors Money International in Ireland, shares the company’s experience of re-opening to new customers this year under a new retail brand Spry Finance against the backdrop of the pandemic, and sees a positive outlook for future market growth.
When Seniors Money Mortgages (Ireland) DAC – which is the only provider of lifetime loans in Ireland – re-opened to new applicants recently you also introduced a new retail brand, Spry Finance. What was the thinking behind this?
Both Spry Finance and Seniors Money are divisions of Seniors Money Mortgages (Ireland) DAC, which is the Irish operation of the Seniors Money International group (SMI). Spry Finance is the new retail division. Its role is to promote the product and then guide people through understanding and applying for a Lifetime Loan. The loan itself is still provided and serviced by Seniors Money, the lending division, which has been the leading lifetime loan lender in Ireland for over 15 years.
Spry Finance was established to create a clear distinction between the loan origination role (generating leads and then providing information, support and guidance to those who are making the decision about applying for a Lifetime Loan) and the role of being the lender and servicer of the lifetime loans thereafter. Until now both roles have been carried out under the Seniors Money name (so Spry inherits all that experience). With the welcome and ever-increasing focus on consumer protections in relation to financial services, we believe that having a separate division with a specific focus on the sales and arranging phase will help the group maintain its position as the market-leader in the lifetime loans space in Ireland, both as an originator and as a lender.
SMI has provided lifetime loans to clients around the world (Australia, New Zealand, Ireland, Spain and Canada) for nearly two decades now and we’ve learned along the way that, whilst loan origination and lending can sometimes feel like different business models with different economics and value chains, stakeholders (including customers, funders, regulators and shareholders) all want the same things ultimately. They want confidence that the loans are sold safely and transparently – which is where Spry Finance is laser-focused – and then that the loans will be reliably managed right through from credit decision to loan maturity and collection – where Seniors Money also has deep experience and track record.
How does the sales process work?
Spry Finance continues to follow our tried and trusted model whereby 100% of potential applicants, irrespective of whether we generated the lead ourselves or it was referred to us by a broker, are required to undergo a consultation process with one of our Client Consultants. In addition to comprehensive information being provided to the client, the process gets to the bottom of what the client’s personal and financial circumstances are and whether or not a lifetime loan is a suitable solution for them.
It is not in our interest to lend to people who do not fully understand how a lifetime loan works or for whom a lifetime loan is just not suitable. Spry will routinely advise clients that a lifetime loan is not suitable for them, if that is the case. Where it is established that the loan is suitable, Spry will assist the client in preparing their application and submitting it to Seniors Money. Seniors Money then takes care of processing the application, making a credit decision and creating the new loan.
Has the COVID-19 pandemic impacted upon the company’s ability to reach new customers and, if so, how is the business adapting to new ways of working?
The Spry consultation process ordinarily includes a number of face to face meetings with clients. In Ireland these meetings customarily take place in the client’s own home. Clearly our ability to conduct such consultations is impacted by COVID-19 lockdown restrictions.
Like many other businesses we have developed new ways to do business. A lot of the preliminary interaction with clients is now done over the phone and via email. Where face to face meetings are permissible they are conducted under social distancing rules, including the use of face masks and table-top acrylic screens. We’ve also equipped the Consultants with external screens for their laptops which can be turned to face the clients from a distance, and documents are provided and signed electronically, further reducing or eliminating physical paperwork. Where physical meetings are not allowed or feasible, we can conduct much of the consultation via video conference, although we still insist on at least one substantive face to face meeting before an application can be accepted and this has necessarily slowed down the progress of some cases through the pipeline as we await a re-opening of lockdown restrictions. We don’t think it is something that can be compromised on though, to ensure that we have the best possible understanding of each end every client.
How would you describe the appetite for equity release in Ireland currently? Do you see evidence of a pent-up demand, since the product was not available for a number of years?
We’ve long been aware that there is an ever-present appetite for equity release in Ireland. Even before we launched we had built a significant pipeline of unsolicited leads from prospective clients who had joined our waiting list on our website.
The number of Irish people aged 60 or older has increased by over 50% since Seniors Money first entered the market back in 2006, and these people are more active and feeling younger at heart than ever before – arguably therefore having an even greater desire than their predecessors to maintain a certain level of lifestyle in retirement. Unfortunately, adequate pension planning and provision has not improved much in that period for many of this new and growing cohort of over 60s who now face the same classic issue of being asset rich but cash poor.
We certainly saw evidence of pent-up demand both before and after our re-opening, which translates directly into a healthy flow of leads. However, we think the demand we are experiencing would be even greater if it were not for the COVID-19 backdrop. It’s difficult to quantify but it’s extremely likely that many people who would otherwise already be applying to us are instead temporarily holding back until the wider outlook is more certain and they can actually put the funds to the required use. For example, the most common loan usage has always been ‘home improvements’ and this simply can’t be done when the construction sector is still in lockdown.
What opportunities do you see for new funders and investors to enter the Irish market?
The Irish market will definitely see more participants. It is likely this will be a mix of Irish financial institutions as well as overseas parties. The market is attractive to investors given the demographics and that much of the legal and regulatory systems mirror that of the UK. The only limiting factor is size, with the addressable market being less than 10% of the UK.
SMI would welcome new market entrants. In the markets we have operated in, it has been our experience that more players is a positive dynamic which enlarges the market to the benefit of all. In the meantime, we believe that Spry Finance and Seniors Money themselves offer an attractive opportunity to new funders who would like to invest in Irish lifetime loan assets. We are a ready-made, experienced end-to-end platform to safely originate and manage these assets.
How do you assess prospects for growth in the equity release market in Ireland for the year to come?
We are very positive on the prospects for growth in Irish equity release market in the medium term. As I mentioned earlier, the Irish population is ageing and we see equity release as an increasing element of retirement planning going forward. Looking forward to 2022, we see further growth in demand for equity release as the Irish economy fully reopens following Covid-19. We expect to see increasing numbers of our client base exploring the equity release product to see what opportunities the product can offer them.