Vision Equity Living has dropped its variable interest rate on its income and combination equity release plans from 8.15 percent to 7.99 per cent to accommodate a perceived move by advisers towards a fee-for-service remuneration model.
Designed to accommodate planners who operate on a fee-for-advice basis, the lower rated plans eliminate mandatory up-front commissions that applied on the 8.15 per cent variable rate, typically one percent of a loan.
The 0.16 per cent premium on the higher interest rate was used to fund the 1 per cent up-front commission to the adviser, who could have either kept this or credited the client’s account in their payments.
Planners who wish to continue to earn an up-front payment on the lower rated plans can charge clients a settlement fee equivalent to the 1 per cent commission that applies on the 8.15 per cent variable rate.
Planners trail commissions are unaffected in either plan by the new rate, which Vision claims is the lowest available from Senior Australians Equity Release Association of Lenders (SEQUAL) members in the equity release market.
The 8.15 per cent rate remains in place on Vision’s lump-sum plan, offering planners the standard one per cent up front commission.
Managing director Brian Gillman said the 7.99 per cent rate would now “make the contract between planner and client totally transparent, eliminating any potential confusion over commission rebates or offsets to clients”.
“An adviser gets no up-front commission on lower variable rate, unless he or she wants to, and then we will oblige by simply charging up to a 1 per cent settlement fee up-front.
“In this case when a client begins her actual transaction she is only paying 7.99 per cent of $101,000 (including the $1,000 settlement fee).
“When you work out the compounding effect over time of paying 7.99 per cent interest on the loan, rather than 8.15 per cent, the saving is considerable to the client,” he said.
