For many UK homeowners, particularly those navigating later life, the prospect of downsizing can feel overwhelming.
Deciding which furniture and possessions must be given away, hunting for the perfect smaller property, then adjusting to living in that reduced space – all of these can be stressful experiences.
Nevertheless, research from Legal & General Financial Advice shows that approximately one third of homeowners aged over 55 are contemplating such a move, with nearly 2.9 million actively planning for it.
This is perhaps unsurprising because the motivations for downsizing are clear.
I believe a client should have one person they can call who has an oversight on everything
For starters, there’s the financial security. This can translate to an average of £305,090 in unlocked equity for those moving from a four-bedroom house to a two-bedroom home, according to analysis from Savills.
The released funds can pay for a dream retirement, cover rising living costs or give younger generations a helping hand onto the property ladder.
For other people, downsizing is less about the money and more about adapting to changing mobility needs or moving closer to family members in later life.
Incurring costs
However, the path to a smaller, more suitable home is not always straightforward and is often plagued by obstacles.
First, the costs are significant: stamp duty land tax, estate agent charges, and conveyancing and removal fees can easily amount to tens of thousands of pounds.
Independent financial planner Rory Albon says people are often put off downsizing because they begrudge paying these added extras.
There’s always that emotional layer. Are you really ready to leave your family home? To sell up and move away from your grandchildren?
He adds: “They think, ‘I’m moving to a smaller house, and now I have to pay £30,000 to the government, and everything else that comes with it.’
“For many, the overall cost of moving is simply too high. It feels like the cost of doing business is just not worth it.”
This “downsizing paradox”, as Albon describes it, can significantly diminish the financial benefits of moving.
Emotional ties
Beyond the financial considerations, the emotional ties to a property can be equally challenging. Leaving a long-term family home, with all the memories and milestones associated with it, can trigger strong feelings of loss, guilt and fear of the unknown.
This is precisely where financial advisers can show their value.
As most already have a holistic view of a client’s entire financial life, they are uniquely positioned to give an unbiased opinion on the best course of action. In other words, they can help the client take the emotion out of an emotional decision and ensure they are doing the right thing to achieve their financial goals.
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By acting as a sounding board, they can help clients process these complex emotions and reframe significant life changes, such as by relabelling ‘downsizing’ as ‘right-sizing’.
Tools such as cashflow modelling are invaluable in such situations, enabling advisers to stress-test different scenarios for the client and provide a clear, visual roadmap.
‘GP for your finances’
Albon believes clients should regard their adviser as “a GP for your finances”: someone who provides expertise and, where they can’t help, supplies trusted referrals.
For many people, the overall cost of moving is simply too high
He adds: “Ninety-nine times out of 100, I’ll be able to solve the problem myself; but, for that one in 100 where I can’t, I want to be the one who refers you to a specialist.
“I want to own that relationship – not for selfish reasons but because I believe a client should have one person they can call who has an oversight on everything.
“They may not know the absolute best mortgage on the market or the details of a property in a different county, but they know exactly who to go to.”
Personal decisions
When it comes to downsizing, perhaps the most critical part of an adviser’s role lies in what Albon calls “the soft, squidgy, human bit of financial advice”.
As he explains: “I can show someone, mathematically, what the best option is. But there’s always that emotional layer. Are you really ready to leave your family home? To sell up and move away from your grandchildren, or to a completely new area? These are deeply personal decisions.”
Ninety-nine times out of 100, I’ll be able to solve the problem myself; but where I can’t I want to be the one who refers you to a specialist
This highlights the fact that, sometimes, even if a less favourable financial option is chosen, it may still be the right choice emotionally.
By taking an empathetic approach, advisers can transform the daunting prospect of downsizing into an exciting new chapter in their clients’ lives.
And, in a post-Consumer Duty world focused on good outcomes, that’s surely the best outcome of all.
Kimberley Dondo is a journalist for Money Marketing
