The latest insights with Liquidity4Life’s Executive Chairman, Andrew Smith

by | Apr 12, 2024

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The following is an interview between Managing Editor of IFA Magazine Alex Sullivan and Executive Chairman of Liquidity4Life Andrew Smith.

Alex: Andrew it is good to see you again. I would love to talk about Liquidity4Life and Home Drawdown. You know we at Clifton Media are great supporters. For our listeners, can you give a brief history of your background, which I know has been extensive. Also, I know you are hoping that following this interview a lot of industry people will join you as shareholders on the Liquidity4Life journey. This is an opportunity to participate in an EIS investment but also to participate in the early stages of what you see as a whole new pillar for the financial planning profession.

Andrew: Thanks, and great to see you too Alex. As you know, I have been in financial services and wealth management pretty much all my life. I set up my first financial planning business when I was 23 with the Hambro banking family. In the 90s, we built a very large financial planning practice, we were one of the first users of wrap platforms in the UK with lots of recurring revenue and we ran a national franchise of IFAs, effectively a consolidator, when people weren’t even thinking about the word consolidation. We sold that business.

 
 

Fast forward – I was approached by American Express to run a JV with them when they wanted to come into the UK Financial services market. It was a great time and a great opportunity. I loved the business strategy we put together and I am convinced Amex would now be the dominant brand in UK financial planning if they had completed the plan. Unfortunately, politics, and ultimately a lot of money took over, and Amex Global decided to come out of financial services and we in the UK were left belonging to card and travel. A very amicable separation ensued.

I’ve done lots of other things all hinged around asset management which has always been my passion, and significantly I was one of the 4 Founders and COO at Succession Advisory Services, where I drove our platform strategy and investment matrix. I believe on many metrics that business was a great success, and it was during the end of my time at Succession that I started to develop the idea for an investment-based alternative for equity release and to lifetime mortgages in particular.

I hope this is helpful to your listeners Alex, I’ve tried to keep my background as concise as possible. Hopefully the relevance is that I know how to build asset-based businesses, this time it is residential real estate.

 
 

Alex: Thanks Andrew. We have known each other a long time and I know you always like to build businesses that are ahead of their time. Tell me about Liquidity4Life. I know you think the returns for shareholders can be similar to the returns that early investors in wrap platforms have achieved. We know Investors in the first wrap platform providers did exceptionally well.

Andrew: Liquidity4Life® is a SaaS business that I co-founded with colleagues who are investment bankers, financial services professionals, and product specialists. We have been working on this for over 3 years and we felt there was room in the market for something different to traditional equity release.

Don’t get me wrong, I am not here to criticise the current products. It was more we felt there is a need for an investment-based alternative to a range of mortgage products. We also wanted housing wealth to become part of mainstream financial planning rather than equity release being a niche product.

 
 

Home Drawdown® will allow homeowners to continue living in their home while converting it into a liquid, property-based investment from which they can withdraw capital and income. There is no mortgage involved in Home Drawdown, which will help to solve many inter-generational issues and provide some great tax planning opportunities.

Alex: There is a lot in the press at the moment about consumer duty and, in particular, vulnerable clients. What are your thoughts?

Andrew: I will be honest and say I have a lot of thoughts in this area. I love the work that people like Jonathan and Tim are doing at Comentis with their online Duty of Care Assessment, and we will unquestionably incorporate solutions like that in our tech build.

 
 

However, when the industry talks about vulnerable clients, it is really saying we want to prevent older people from being mis sold a product, particularly equity release. I totally agree with this and hopefully less and less of this now occurs.

However, vulnerability has a much wider meaning to me, and why I, and my team, have spent 3 years of our time and money putting something together that will change our industry. A lot of our society is vulnerable whether that is the elderly or younger generations. This has been made worse by the UK’s cost-of-living crisis and high interest rates. 

Many people can’t afford to pay their bills but don’t want to downsize and leave their home. We understand the emotions involved in the saying “my home is my castle”.

 
 

To a lot of older people who are asset rich but income poor, if you could say, you can stay in your home for the rest of your life or go into long term care, and as an example, we can generate an extra £500 per month, index linked, to live on under a  financial plan carefully managed by your adviser, it would be a game changer for these people.

Home Drawdown will greatly benefit a good proportion of the population but the key for us is that the home becomes another investment pot of money (it just happens to be units in a diversified property fund) that form part of a mainstream financial planning process, the sort of thing that is carried out daily by the majority of advisers in this country.  There will be an accredited group of nationwide law firms who will be involved in the process, so the consumer has the reassurance of a qualified adviser and a member of the legal profession. What will Home Drawdown achieve? It will help the social crisis in this country. Some people who are in danger or at risk of not having enough retirement income can use their home wealth like any other asset and have reassurance that they can enjoy their retirement. They will have access to planning advice, and we have all seen the stats, people are better off when they get advice from an adviser.

For our industry it introduces a whole new raft of clients that otherwise would not have been cost effective for planners to manage. I understand some planners don’t want new clients, but we want our industry to grow, and we want more consumers to gain access to face to face planning. Home Drawdown could be a way to bring new IFA blood into the profession.

 
 

It Is also Important to note that home Drawdown has no age restriction; is not dependent on earnings; can unitise 100% of housing wealth; and can help to optimise tax planning opportunities.

I talk to a lot of distributors, consolidators, and product providers. For them, and put simply, Home Drawdown could double the asset flow of these businesses. That is a very attractive concept.

Alex: What can you tell me about the tech that is going to manage all of this?

 
 

Andrew: Our software (SaaS) has to manage the interests of each stakeholder, from the homeowner, their financial adviser and their lawyer, to a depositary and a fund manager – and I shouldn’t forget property managing agents. Critically, the software will manage the current and future needs of thousands of Home Drawdown customers, whose financial interests will be overseen by their financial advisers. The software will also help the fund managers to operate the Home Drawdown property funds, which we expect to be valued in the billions.

The algorithm to manage this was completed by our banking team, who were previously responsible for managing the balance sheets of major investment banks, so we have bank level risk governance embedded for the benefit of each Home Drawdown plan holder. One of our founders is a subject matter expert on blockchain and tokenisation, so clearly, we are keeping an eye on those opportunities for the future and for other jurisdictions.

The tender for our software build w”s wo’ by a very successful British technology company that has huge experience of designing and developing software solutions for banks, platforms and life and pension providers in the UK. Their reputation in this field is exemplary.

 
 

Alex: What has been achieved to date?

Andrew: As I’ve just said, Liquidity4Life has designed and will deliver innovative new end-to-end tech that will operate and manage Home Drawdown.

We have designed a range of Home Drawdown plans that use existing, regulated products within a bespoke framework, and we have developed a proprietary algorithm and cashflow model that will power residential property portfolio management, and Home Drawdown plans.

 
 

Alex: Tell me a bit about the regulation?

Andrew: As you would expect we have engaged City-based compliance consultants to help us with product design, and we will start work with specialist lawyers on the documentation shortly.

Home Drawdown plans will incorporate existing regulated products, so there won’t be any surprises. However, we have been able to innovate by removing expensive, unattractive or legacy features and by replacing them with more user friendly, modern or brand-new features.

Our compliance consultants will maintain continual dialogue with the FCA and our Home Drawdown plans will reflect any guidance received.

When we launch, we will have partnered with a number of sponsors, which will include major distributors, life and pension companies, wrap platforms and the financial planning industry. We will be working closely with them on all regulatory and legal matters.

Alex: You know I love what you guys are doing at Liquidity4Life and just to substantiate the size of the opportunity, I read recently that Savills reported that the value of all the world’s real estate reached $380 trillion by the end of 2022, and growth was driven by residential, which is by far the largest sector at $290 trillion, accounting for 79% of all global real estate value. This is larger than all global equity and debt securities combined. The opportunities are mind blowing and I know you have already been approached to set up franchises in the UAE, Canada, Malta, Jersey, and others.

Andrew: Totally agree and in the UK alone, there is a staggering £4 trillion of inaccessible housing wealth owned by the over 50’s, many of whom are asset rich and cash poor.

Alex: We did a Webinar interview recently and it confirmed what you and others are saying. Around 93 per cent of financial advisers believe property wealth should now be a key consideration when giving financial planning advice, according to research by house wealth and fintech platform Nokkel and FNZ. 

Also, research conducted by the Lang Cat, found that when it comes to retirement planning, nine in 10 advisers believe retirement advice specifically should include property wealth. 

So, what are the next stages for Liquidity4Life?

Andrew: We have raised £525,000 to date. We have pledges for a further £200,000 and we are looking to raise another £475,000 under EIS during April and May. As I said earlier, we would love forward-thinking industry practitioners to join us as shareholders. I wouldn’t have spent over 3 years on this already if I didn’t believe it could be as significant as the introduction of wrap platforms into the UK. The minimum investment is £10K.

The company is applying for Pending B Corp status, and we will drive decarbonization and climate change efficiencies to continually upgrade residential infrastructure. This is a passion for all the team.  

As we discussed earlier, Liquidity4Life® is already in license and franchise talks in other jurisdictions. We are also talking to several private equity houses and family offices who love the idea of providing both equity and debt funding to Home Drawdown property fund(s) in UK residential real estate which promises low volatility, stable returns and the guarantee of owner occupiers who want to live in their homes for the rest of their lives or go into long term care. Hopefully a win/win for all parties.

Alex: Thanks Andrew. It all sounds really exciting. People interested can contact you here and there is further information below.

Please click the links to see the latest L4L Presentation, a short Home Drawdown Video and a video introducing the Investment Opportunity.

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