The former chief executive of Irish Permanent has a new business that he says is not a get-rich-quick scheme, writes Laura Slattery
The future is in niche markets, not in mainstream banking, according to Mr Billy Kane, the former chief executive of Irish Permanent. And Mr Kane has found his new niche: home reversions.
Home reversion schemes such as Mr Kane's new venture, Shared Home Investment Plan (SHIP), target older people by offering to buy a share in their property at a discounted value. Older homeowners take a lump sum and live in their home until they die or decide to sell.
In many ways, it is the opposite end of the market from the one Mr Kane concentrated on at Irish Permanent, where expanding its share of the first-time buyer market was a main priority. Back in the mid-1990s, home reversion just didn't make as much sense, he says.
Since then, 100 per cent house price inflation has changed his outlook. "Now you can start giving people chunky amounts of money for their property," Mr Kane says.
SHIP estimates that people over the age of 65 own properties with a total value of €50 billion. Better still from SHIP's perspective is the fact that going forward, Ireland's ageing population is unlikely to enjoy the traditional pension worth two-thirds salary.
For Mr Kane, the death of the defined benefit pension scheme, means the birth of a new business opportunity, as increasing numbers of cash-poor pensioners are forced to sell part of their most valuable asset.
"I think what we're doing now is going to be as common as refinancing now is in the mortgage market for people who just want to build an extension," he says.
The big banks are more interested in roll-up mortgages for the elderly than home reversions. "By their standards, it's a boutique business," he notes.
Since leaving Irish Life & Permanent in May 2001, following its takeover of TSB, Mr Kane has been free to indulge in entrepreneurial buzz-seeking with the help of a golden handshake of almost €358,000.
In November last year, actuary Mr Ciarán Deeny, who previously worked for the only other company in the market, Residential Reversions, approached him with the concept with a view to expanding its popularity.
One recent product encouraging people to unlock the equity in their homes, the EBS Family First mortgage, was criticised by some for putting pressure on people to provide deposits for their children's houses. SHIP's scheme, however, encourages older people to spend the money however they see fit.
"The couple they are targeting are not our couple," says Mr Kane. (SHIP's market is people aged 70 and over.) Nevertheless, the reaction the packaging of the EBS product provoked, together with the serious consequences doing a home reversion deal could have for older people, means that over-aggressive marketing could easily backfire.
"This is a product that people will buy - it's not a product that will be sold," Mr Kane asserts.
Mr Kane is executive chairman of SHIP and the principal private backer, investing €300,000 in the company. The nature of the business - advancing money to people then essentially waiting for them to die - means the company needs a strong line of funding, which comes courtesy of a number of unnamed institutional backers.
It is a "medium-term" game, Mr Kane confirms. "There's no such thing as get-rich-quick schemes - with the exception of the dotcom bubble, which I missed," he says.
From Bray, Co Wicklow, Mr Kane was one of the original directors of the financing company Woodchester, now GE Capital Woodchester, which specialises in leasing equipment and cars. He later played a key role in setting up Irish Permanent Finance.
Mr Kane's other current interests outside SHIP is his role as non-executive director and shareholder at Simply Mortgages, a fast-growing mortgage-broking business.
Because there are no shareholders to constantly placate, developing a new company does not require as big an input as managing a large plc, Mr Kane believes. "I don't do it nine to five, is what I'm saying."
