Lending specialist La Trobe Financial gets a headstart in the aged care sector with a new product that has attracted more than $30 million since launch.
A year ago, La Trobe launched a new retirement lending product unseen in the Australian market. It is not quite a traditional bank loan and not quite a reverse mortgage.
Instead, the La Trobe Financial Aged Care Loan combines certain elements of both to provide an alternative offering to seniors considering aged care accommodation. Their offering relieves asset-rich but cash-poor retirees from selling their home just to fund ongoing and one-off payments when moving to an aged care facility.
La Trobe Financial chief lending officer Cory Bannister, said this new strategy may not necessarily suit ultra-high net worths (UNHWs) or retirees that largely rely on the pension but it is a compelling offer for the bulk of the bell curve - seniors with either one or two properties but little cash savings.
The culprit is the huge financial burden that comes with accessing aged care facility. You either pay a lump sum deposit (called Refundable Accommodation Deposits or RADs) as high as half a million dollars or you have to make regular ongoing payments.
Instead of liquidating their investment portfolios or sell their home to fund either of these payments, clients can instead consider an aged care loan.
To date, La Trobe has lent more than $30 million, compared to the total RAD pool of around $20 billion, suggesting the size of the market.
The challenge is the lack of basic competency requirements in Australia for aged care specialists. Mid last year, senior Australians and financial planners have called on ASIC to start specifically regulating the area of aged care financial advice in order to protect consumers.
On the upside, many financial planners have been pro-active in completing specific accreditation courses on aged care regulation, social services and estate planning. David Reed, winner of the 2015 AFA Adviser of the Year, is focusing his efforts on retirement coaching. Early this week, Financial Standard also reported that the next boom segment in financial services is the demand for retirement consultants.
But for now, aged care products that suit certain segments of the seniors market remain thin on the ground. With their newly-minted Aged Care Loan, La Trobe Financial is among the few that caters for this largely underserved community.