Equity Release  

Damning equity release study ‘heavily skewed’, says trade body

Damning equity release study ‘heavily skewed’, says trade body
Association of Mortgage Intermediaries chief executive Rob Sinclair at IMLA's Intermediary Expo last week (June 29) in Birmingham

A trade body has accused a damning equity release study published last month of using a “heavily skewed” data sample.

The study, published by the Financial Services Consumer Panel on May 5, interviewed 28 consumers who had purchased an equity release product. The majority (22) had consulted an adviser.

It found the decision-making process was quick, that advisers used “persuasive sales techniques”, and that language used by advisers and in documents explaining the product “inhibited participants’ understanding”.

Of the 28, 10 said buying the product was a “bad decision” in hindsight. 

Speaking at Intermediary Expo last week (June 29) in Birmingham, Association of Mortgage Intermediaries chief executive Rob Sinclair said one area of regulation the Financial Conduct Authority is “passionate” about is lifetime equity release.

“The latest report which came out from the Consumer Panel indicates that. And it was a skewed sample, heavily skewed towards looking at the vulnerable.”

Of the 28 interviewed in the report, 18 had "limited financial resources", while the other 10 had "greater financial resources".

Sinclair did acknowledge, however, the study’s findings that “lots of people felt they had bought something they didn’t understand”.

“That does give us something to think about,” he told brokers.

Sinclair also said that despite industry efforts over the past 10 years, he does not feel like much progress has been made to truly solve some of the issues plaguing the equity release sector.

“We are still not giving something rigid enough, and rightly the regulator is coming back to look at that.”

In April, the FCA warned advisers it needs to look again at the equity release market to make sure it is working in the best interests of consumers.

It said it was mulling over whether it needs to follow up on earlier findings concerning poor quality advice and checking that standards among intermediaries giving advice have improved.

One of the worries is that equity release is being recommended by advisers when it is not the best solution for clients, either because the client is set on it or because the adviser is an equity release specialist and does not want to pass the business on.

In 2020, the FCA sounded alarm bells over unsuitable equity release advice after a review found some mortgage advisers were falling short in the market.

The equity release industry has had to work to improve its reputation, which took a knock in the 1980s and 1990s amid a number of scandals, leaving people with large amounts of debt.

Some have said the regulator’s latest probe into the equity release sector will get rid of some “bad apples”.

FTAdviser approached the Financial Services Consumer Panel for comment.

ruby.hinchliffe@ft.com