Equity release could 'come back to haunt' advisers

Equity release could 'come back to haunt' advisers

Advisers' inability to advise on equity release and other interest-only mortgages could "come back to haunt" them, it has been claimed.

Aaron Conlon, managing director at Fluent Lifetime, urged advisers to give equal consideration to equity release, retirement interest-only (RIO) and other interest-only products to avoid wrongly advising clients.

He said: "Are the majority of advisers able to provide advice on equity release products on the one side, and RIOs on the other? I don’t think so.

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"As a result the demand for later life guidance could create a bubble of questionable recommendations, which might well lead to regulatory issues and [Financial Ombudsman Service] claims, if advisers are proved not to be giving equal consideration to all the possibilities for a customer."

To achieve a suitable balance in advice, Mr Conlon suggested advisers ensure they were either fully qualified to consider all later life approaches or outsource advice to a suitable third party.

He said: "The danger of giving advice, but only being able to provide it where permissions are limited to one or the other, will come back to haunt advisers, their compliance departments and their insurers, if action is not taken very quickly.

"Demand for genuinely inclusive guidance is outstripping supply and as a result, customers could in the future find they have taken the wrong option and all because the adviser community is not yet suitably well qualified or fails to seek help and guidance on those parts of the later life lending sector for which they are not qualified."

Gary Webster, head of partnerships and independent adviser at Equity Release Supermarket, said he was aware of concerns regarding limited span in advice in the later life space and regulation has already moved to address the matter.

Mr Webster believed the FCA has addressed the issue in its amendment to the Conduct of Business Sourcebook in March this year. 

The handbook requires where a customer is looking to take out a retirement interest-only mortgage a firm must inform the customer, either orally or in writing, that a lifetime mortgage may be available and more appropriate. 

The FCA's rules also set out that all equity release sales must be advised - be it via an intermediary or direct advice route. 

Under these rules, an execution-only equity release sale is only possible if the client has first explicitly rejected any advice provided and requested an execution-only transaction.

Mr Webster said: "I can only speak for our major introducers who do not hold equity release permissions, but where appropriate they will refer customers to us and we will take over the advice and pass back the client if a lifetime mortgage is not appropriate or suitable for their needs."

Earlier this year figures from the Equity Release Council found homeowners unlocked £971m from their homes in the second quarter of 2018.