More 2 life has uncovered evidence showing advisers dabbling in equity release may be recommending the wrong deals to clients.
Stuart Wilson, marketing director at more 2 life, said a large number of new advisers are crossing over to later-life lending from the residential sector.
He said these advisers, who have not specialised in equity release, may be unaware of a range of product innovations that have been made during the past few years and as a result they are failing to recommend the best deal available.
The provider has found three out of four over-65 homeowners could potentially qualify for an enhanced loan-to-value based on assessment of their medical condition, yet only 15 to 20 per cent of customers actually received an enhanced plan according to a more 2 life estimate based on Age UK Later Life in the UK, the Department of Health National Diet and Nutrition Survey and ONS population data.
One of the main reasons for this was a survey of 100 advisers at the end of 2015 by the provider found that 22 admitted they did not routinely ask health questions when discussing equity release with clients.
Mr Wilson said he was concerned that other features, such as downsizing protection and inheritance protection, were also being overlooked.
Inheritance protection is a feature designed to ensure part of a property’s value is ringfenced so they can pass it on to the next generation – a key concern for many equity release borrowers.
Downsizing protection is designed to ensure clients do not incur any early repayment charges if they repay the loan as a result of selling their home and moving to a different property.
The warning about equity release mis-advice comes amid record growth in the equity release sector, as more and more older people look to access the wealth locked up in their homes.
The rise in popularity of equity release has led to a tripling of the product options over the past three years, with 78 now available - many of which contain new features designed to protect the consumer.
Mr Wilson said people who did not receive advice on these products could take their complaints to the Financial Ombudsman Service (Fos).
He said: “At the moment, the ombudsman is not finding in favour [of the complainant]. The point is these are complaints about loans five to 10 years ago, when downsizing protection did not exist.
“I think it is important that advisers recognise these are features that exist today, and if you don’t talk about them and have a record you have discussed these concerns, there could be a potential issue further down the track.”
If complaints against advisers are upheld by Fos, they may need to claim against their PI, pushing up the cost of premiums.
A spokesperson for the Financial Ombudsman Service said it currently receives 50 to 100 cases about equity release every year, but data on uphold rates was unavailable.
A spokesman for the ombudsman said common complaints about equity release were about the amount of early repayment charges, how much needed to be repaid and the suitability of the product itself.
The spokesman said: "Many complaints are brought to us by relatives – for example, after their parents have passed away.”
The Equity Release Council stated it had set out a framework for advisers to follow alongside their regulatory responsibilities.
It also publishes an adviser checklist detailing 13 of the most significant points to consider in the advice process when assessing any customer’s suitability for equity release.
In addition, the Equity Release Council hosts continuing professional development sessions and publishes regular market data to members and the wider industry.
Nigel Waterson, chairman of the Equity Release Council, said: “These activities are designed to complement providers’ own efforts to engage with the adviser community to ensure the specifics of their individual propositions are understood by those who advise on them."
Martin Bamford, managing director at Surrey-based Informed Choice, said members of the Society of Later Life Advisers needed to demonstrate their knowledge of equity release products by holding the Chartered Insurance Institute's ER1 equity release qualification or an equivalent.
He said: “When an adviser is recommending any product, they need to be aware of all of its features ensure the recommendation is suitable.
"Compared to some pension and investment products, equity release is not a particularly complex area, although it’s important to be well versed in the features before recommending it."
simon.allin@ft.com
