The elevator pitch
Most fintech and insurtech innovations are solutions looking for a problem…at Futureproof, we identify problems needing a solution. So, here is our simple elevator pitch:
Any new mortgage that monetizes home capital into tax-free annuity income without depleting home equity,
has to be an absolute game-changer !
It is decades since reverse mortgages and annuities were invented. When it comes to retirement funding, reverse mortgages are not fit-for-purpose and annuities are not selling.
Over the 35 years since, no one has been able to come up with any better products. The retirement funding space is well overdue for some re-thinking, intelligent innovation and new smart mortgages to underpin a new generation of ethical financial products that deliver real value to Customers.
Who are we
Futureproof Financial Group Limited is an unlisted public company with corporate offices in Hong Kong, research & development based in Sydney and commercial representation in London.
It is a portfolio company of Business Innovation Group Limited, a disruptive technologies innovation hub.
What we do
Futureproof is a disrupter of the retail banking, life insurance and wealth management industries.
We develop financial instruments and nextgen smart mortgages to support new fiscally responsible financial products that are focused on the financial needs of the ageing population.
Futureproof is not a mortgage retailer or financial product issuer.
Whilst in the category of equity release, our new smart mortgages are fundamentally different from traditional equity release products such as reverse mortgages, shared appreciation mortgages or shared equity mortgages or fractional property ownership.
The Innes Mortgage Instrument™ under-pins three new types of mortgages:
- Equity Preservation Mortgage™ – interest only
- Equity Growth Mortgage™ – principal + interest
- Equity Access Mortgage™ – interest-free
These smart mortgages are designed to monetize home capital without equity depletion.
Futureproof has developed these nextgen smart mortgages to deliver an entirely new approach to retirement funding, equity release and financial advice.
Our global challenge
Retirement funding gap
The retirement funding shortfall that already exists world-wide is growing by 5% per year.
“…the (retirement funding) gap at 2015 was already at $70 trillion…we project this gap to grow to $400 trillion by 2050.”
World Economic Forum
White Paper (June 2019)
The World Economic Forum reports the size of the global retirement funding shortfall is calculated by Mercers to grow 5% annually:
- USA – $US28 trillion (2015) growing to $US137 trillion (2050)
- United Kingdom – $US8 trillion (2015) growing to $US33 trillion (2050)
- Australia – $US 1 trillion (2015) growing to $US9 trillion (2050)
The statistics are plainly telling us there is a problem in all major markets, needing an urgent solution.
A wicked problem
A wicked problem is a complex and intractable social, economic or cultural problem that defies a solution for four reasons:
- incomplete or contradictory knowledge
- number of people and opinions involved
- large economic burden
- interconnected nature of these problems with other problems
In looking for solutions, it is clear that most think-tanks, policy research centres, industry consultative bodies and consulting actuaries naturally focus on changes or improvements to existing frameworks, whether they be government policy, pension funds, superannuation rules, social security pension entitlements or retirement financial products.
Futureproof does not believe this approach is anywhere near sufficient. Indeed, it reflects traditional thinking and a narrow approach to the problem.
Whilst these sorts of recommended changes will obviously have a role to play in mitigating the funding gap, they address the symptoms not the cause.
Futureproof believes the size of retirement funding problem is set to worsen well beyond even the World Economic Forum projections.
Global economic conditions now dictate that we are likely to face another decade in a low-interest environment. This means any gains made through reforms that ‘tinker around the edges’ of existing retirement products, schemes or pension funds (which are focused on cash, fixed interest, bonds & equities) to now try ever more desperately to chase better investment returns in the accumulation phase ahead of retirement, are not a solution.
These gains will not only be quickly eroded by longevity increases, but defeated by the continuing low interest-rate environment.
What wicked problems need is thought leadership and real innovation.
When looking for solutions, attention has to broaden beyond seeking incremental improvements to the traditional pillars of retirement funding, to a new asset class altogether – home capital.
This asset class remains largely overlooked and certainly under-utilised because of the absence of any workable financial instrument that can truly access home equity. After 40 years, reverse mortgages still remain entrenched in our thinking as the only financial instrument capable of accessing home equity, only ever releasing small amounts of home capital.
Futureproof believes that what is required now more than ever to meet this global challenge, is an entirely new financial instrument – one that can access and monetise the substantial amounts of stagnant unproductive capital locked up in residential property.
This remains the only untapped asset class of sufficient capital size and depth to have the necessary impact to close the retirement funding gap.
Why we do it
Futureproof was established by insurance industry veterans to develop a next-generation financial instrument to under-pin new types of low-risk mortgages to fund responsible bespoke financial products for the ageing population.
Our objective is to overcome the deficiencies of traditional equity release products, notably reverse mortgages, resulting from their inherent defects and poor design.
When it comes to retirement funding, these traditional retirement funding products are simply not fit-for-purpose.
The only alternative products available to Customers are annuities, which require payment of a substantial upfront cash premium and are seen as poor value, inflexible and expensive. The market is telling us that annuities are simply not selling, despite a growth market.
The bottom-line is that retirement funding needs of ageing Customers are not being adequately met by retail banks, life insurers and wealth managers.
What we achieve
Home capital, accessed responsibly, can be used to better fund retirement provided there is no depletion of existing home equity.
This leaves retirement wealth intact to fund health services and aged care, if it is needed, or to bequeath to the family.
The current generation of equity release products are 40 years old and have never changed.
Reverse mortgages, shared appreciation mortgages and shared equity mortgages are all highly risk-weighted under BASEL II & III, capital intensive to write and expensive to Borrowers.
These products carry serious reputational risk as products of last resort and they should not form part of any retirement plan.
The Equity Preservation Mortgage™ now changes everything for Lenders. Our new mortgages have the lowest risk weighting of all types of mortgages, delivering a more profitable return on bank assets and a more efficient use of their Tier One capital.
Other retirement funding products such as Deferred Annuities, Insurance Bonds and Private Pension products are simply not selling.
Our new mortgages can re-position legacy products into a much wider market – turbo-charging sales by funding the purchase of products using Customers’ home capital rather than paying premiums in after-tax cash dollars.
For Investment Banks
With an average loan size of $800,000 (for Retirees), our mortgages are 10x larger than the average reverse mortgage.
The Equity Preservation Mortgage™ under-pins new low-risk financial products that will, for the first time, unlock and deliver massive flows of new capital into the global capital markets through mortgage lending, asset management, residential mortgage-backed securities (RMBS) and securitization.
This can never be achieved by traditional equity release products having an average reverse mortgage loan principal of only $70,000- $80,000.
Our new mortgages create an entirely new asset class of sufficient size and depth to become a new fifth pillar of retirement funding – home capital – whilst leaving existing home equity entirely intact as the traditional fourth pillar of retirement funding.
This has significant policy implications for government as the dependency ratio of taxpayers to retirees (currently less than 2:1), further declines, increasing fiscal pressure to find urgent solutions for retirement and aged care funding.
How we do it
- Use an intelligently designed financial instrument to provide a unique mechanism to monetise home equity and pay loan interest.
- Integrate this new financial instrument at the core of three new types of smart low-risk mortgages which act as the funding engine under-pinning a range of bespoke financial products for each life stage.
- License our proprietary intellectual property only to regulated financial institutions allowing them to brand, issue and retail Futureproof products to better meet the financial needs of their ageing customers
- Provide a distributed ledger technology architecture platform, managed and hosted securely by leading professional services & technology partners, that plugs into cloud-based open-banking & open-insurance core platforms or via secure APIs to legacy systems and existing technology stacks.