Equity Release Advice Standards Still Subpar, FCA Review Suggests
The Financial Conduct Authority (FCA) is the body responsible for ensuring businesses and consumers in the UK are provided with honest and accurate financial advice on key financial matters. Unfortunately, a newly published review of equity release advice suggests that many service providers are not fulfilling their obligations.
Significant efforts have already been made to ensure prospective equity release customers are offered the frank and objective advice needed to make sound decisions for their financial futures. Most established and reputable providers are doing just that, but the report published by the FCA indicates that further progress must be made.
Much of the issue has been attributed to the fact that the sector has experienced such rapid growth over the past few years. The coronavirus crisis has resulted in a temporary slowdown, but the figures confirm that more people than ever before are considering equity release. This growing demand is being responded to by a rapidly evolving specialist lending sector, which is proving difficult to oversee and regulate effectively.
The Importance of In-Depth Advice
Entering into an equity release scheme is one of the most important financial decisions a typical homeowner will ever make. The type of scheme entered into (along with the terms and conditions of the deal) will have a significant and permanent impact on the customer’s financial future. Nevertheless, there will always be those who attempt to rush equity release applicants into making a quick decision, purely for their own financial benefit.
The establishment of the Equity Release Council (which has improved its services significantly over the past few years) has helped, providing new and existing service providers alike with professional advice – including a helpful ‘adviser checklist’. Though it remains the responsibility of each individual adviser and provider to ensure they operate with their customers’ best interests in mind.
Outlined below is a selection of just a few of the more important points highlighted by the FCA, aimed at those providing support on equity release products and services:
• Obtaining the necessary information from a client to assess their situation and suitability for equity release is not the same as asking them to complete a form.
• Equity release is often entered into (or considered) without careful consideration of the potential consequences and can be an emotive subject.
• The FCA expressed concern that advisers do not always actively challenge the thoughts and assumptions of clients, where they may be inaccurate or misguided.
• Alternative options to equity release should always be discussed openly and honestly where relevant – particularly if they could be more suitable for the client’s needs.
• In instances where equity release is both appropriate and recommended, the adviser should be able to explain why it is a better choice than the alternative options available.
• Where clients have significant on-hand savings they would simply prefer not to touch, the potential benefits of doing so as an alternative to equity release should be discussed.
• The full costs, risks and potential inheritance issues associated with equity release should be discussed frankly, openly and in an uncomplicated manner.
Whether you are interested in releasing the equity tied up in your home or simply looking to discuss your financial future in more detail, we would be delighted to provide you with an obligation-free consultation.
Contact a member of the team at UK Property Finance anytime for more information.