Some advisers have cited the growth of the equity release market as a factor behind poor quality advice, after a review by the Financial Conduct Authority found firms must do better.
Paula Steele, director at John Lamb Financial Solutions said she was not surprised by the FCA’s findings, which she believed was a “by-product of a fast growing industry that has commercialised equity release and in some cases forgotten to ensure that the long term effects are at the forefront of the advice”.
Likewise Martin Wade, director at Access Equity Release, said: “The market offers more choice now than ever before and as such, advisers need to be constantly improving their knowledge. The one size fits all approach of a lump sum with interest roll up is dangerously outdated”.
In a multi-firm review published earlier last week, the regulator highlighted three significant areas of concern about the suitability of advice, which it said increased the risk of harm to consumers.
Its concerns centred around the personalisation of advice, challenging customer assumptions and evidence of the suitability of advice - all of which were found to be lacking.
According to Ms Steele, targets for client numbers had a negative impact as interest in equity release has risen.
A report last month by equity release adviser Key found that while over-55s were borrowing lower sums with equity release, the number of customers taking out a loan had increased.
Ms Steele said: “The increasing interest in equity release has meant that advisers are busier than ever and in many cases tasked to see a certain amount of new clients each week. As most equity release meetings are conducted at the client’s home, advisers have to travel in order to meet with their clients which takes up valuable time”.
Ms Steele added: “Firstly, the main problem is that in some cases advisers aren’t able to spend enough time with their clients, getting to know them and understanding the bigger picture.
“Secondly, due to time constraints, generic documentation may be used to simplify the process, such as client fact-finds and suitability report templates.”
In its review of case files the FCA said it found a number that contained “standard generic text” to justify why customers did not want to consider alternatives to equity release.
The regulator encouraged firms to ensure the customer’s voice can “clearly be ‘heard’ in the file”.
It said that files should contain notes of the customer’s “own words, phrases and explanations… and not just responses recorded in the form of tick boxes or selected from a list of options”.
In response to the FCA’s review, David Thomas, chairman of the Society of Mortgage Professionals, said: “We accept that with the development of greater professional standards, there will be higher expectations... around advisers using more innovative ways to record clients’ decisions in their own words.”
However, Mr Thomas added that the challenge to advisers implied by this expectation should not be underestimated.