The Equity Release Council has expanded its checklist for advisers on what to consider during the advice process and the assessment of a client’s suitability for equity release.
According to the council, the updated checklist is a result of a review by its standards board, and is designed to support a “consistent standard” of advice for consumers across the market.
The checklist has been expanded from 12 to 24 points, with additional emphasis on clients who are vulnerable, remortgaging, and looking to consolidate debt.
For example, advisers are prompted: “Have you established if the customer has suffered from physical or mental health problems, a bereavement, divorce, emotional or financial difficulties, literacy, numeracy, or any other traumatic event, that may leave them in a vulnerable position?”
Additionally, the checklist informs advisers that it is “not a substitute for carrying out a full fact find or providing full advice to your customers on equity release, nor is it a replacement for a Suitability Report”.
Chris Pond, chairman of the Equity Release Council’s standards board, said: “This updated checklist captures the most important points to cover from FCA regulations and Equity Release Council standards.
“We are continually reviewing our standards, and this latest version of the checklist will support advisers in taking a personalised approach to each customer.
“The update will help address subsequent feedback highlighted in the regulator’s recent review of the sales and advice process by helping advisers to understand, fulfil and demonstrate the specific needs of each and every customer.”
A multi-firm review by the Financial Conduct Authority published last month found firms must do more to ensure they are giving appropriate equity release advice.
The regulator’s 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.
Mr Pond continued: “Coupled with independent legal advice and product safeguards, this financial advice process provides the highest level of consumer protection for any later life property-based loan.
"We encourage customers who are considering releasing equity to use a Council member, to benefit from these extra protections and safeguards. We also call on more advice firms to sign up to these best practice standards.”
Advisers who are voluntary members of the Equity Release Council agree to abide by its rules and are signed up to its statement of principles. This includes that they will “seek to deliver suitable outcomes for customers from initial sale through every point of contact during the life of the product”.
Martin Wade, director at Access Equity Release, said: “If we have learned anything over the last three months it is that we all constantly have to evolve and evaluate and it is natural to see the ERC doing just that”.
Mr Wade added: “Documents and requirements set out by the ERC help us all ensure that we keep client outcomes at the forefront of our mind and there are some excellent key additions within the revised adviser checklist. Most notably around advisers being tied or restricted, Lasting Powers of Attorney and debt consolidation.
“We have seen a seismic shift of late by some firms offering advice from a restricted panel or from one provider only and it is imperative that clients are not only made aware of this but are seen to be made aware of this so that they fully understand the limitations this entails.
“Lasting powers of attorney in my mind should be made a compulsory addition to any mortgage where there is a drawdown or offset facility. In the world of equity release, where drawdowns are so available it is essential that clients are made aware of the horrific issues they could encounter should one party to the mortgage not be able to consent to a further release.”
Advisers are prompted in the checklist to advise joint customers that access to a drawdown facility would be removed in the event of either party losing mental capacity, without a registered power of attorney.
Sara McLeish, chief executive of Legal & General Financial Advice, said: “It’s great to see the ERC continue to lead on standards and drive improvements across the market. Equity release is not an ‘immediate needs’ product and the advice process needs to reflect this.
“We welcome the checklist for advisers but also the wider points raised, such as eligibility for state benefits or grants; these are going to be key in the coming months when many people will have to reconsider their financial plans due to the fallout from the Covid-19 crisis.
"This makes it ever more important for advisers to give really rigorous advice that considers the unique circumstances of each customer.”
chloe.cheung@ft.com
