Mr Thomas said that advisers “can do more to record clients’ intentions, but they often have little certainty over what expectations adjudicators and supervisors will have in terms of evidence in ten years’ time, or even longer”.
He added: “As a result, we would like to work with the FCA to ensure that expectations for advisers are as clear as possible, and that incentives in the wider environment don’t make the challenge of giving good advice even harder”.
In addition to concerns around a lack of evidence to support the suitability of advice, the FCA uncovered examples where advisers had not challenged customers’ assumptions enough around lifetime mortgages.
According to Ms Steele, this was down to lack of experience. “Many advisers have excellent knowledge on equity release and have a genuine desire to help their clients, believing that a lifetime mortgage will help their clients meet their objectives.
“However, through lack of training or inexperience, they may not be digging deep enough when speaking with clients.”
Similarly Mr Wade said: “At a firm level, robust compliance and regular adviser training and clear oversight are essential. The ability to offer standard residential mortgages alongside equity release is important”.
A wider conversation
Ms Steele said that while most applications for equity release were lifetime mortgages, it should not only be seen as a mortgage product.
She added: “It would be wise to class it with later life planning as in the majority of cases this product will be in place until death and therefore greater amount of knowledge is needed to ensure that the product is not only suitable now, but also for the future”.
Ms Steele also said that in many cases, clients mistook the interest rate on a lifetime mortgage as the most important part when a product was recommended.
She said: “The most important part of the recommendation is ensuring that the product fits in line with the client’s future needs/changes and that it is the most suitable option available once all other areas have been explored”, adding that a “preferential interest rate [was] a bonus”.
The industry’s response
Commenting on the regulator’s review, David Burrowes, chairman of the Equity Release Council said: “The FCA’s report found that equity release is ‘working well for many consumers’ by helping to meet important social needs.
“We will continue to work with members and the wider market to make sure this is a universal characteristic, by developing and embedding best practice standards which we would like all firms to sign up.”