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FCA decision on standalone equity release qualification goes against grain of market

11 May 2017

The FCA’s decision not to create a standalone equity release qualification for advisers has been seen as moving against current attitudes towards funding retirement.

In Policy Statement PS17/11 Review of the FCA’s appropriate qualification exam standards the Regulator said that consideration of the standalone qualification was a result of concerns raised that adviser firms were not offering equity release because to obtain the current qualification meant they had to be “appropriately qualified” for a product (e.g. mortgages) that they had no interest in selling.

The regulator said it received 18 responses from lenders, intermediaries and their trade bodies as well as qualification providers, but the responses received “did not demonstrate a market need for a change to the appropriate qualification for equity release”. In addition it said: “We recognise that a solid understanding of mortgages is, and is likely to remain, an important competency in giving equity release advice.”

Jon Greer, head of retirement policy at Old Mutual Wealth, pointed to recent research the company had conducted with the Tax Incentivised Savings Association (Tisa), which showed that housing wealth is set to play a prominent role in retirement planning.

“The FCA’s decision to drop plans to create a standalone equity release qualification is against the general direction of travel for retirement planning. While they have left the door ajar to revisit the issue in the future the situation could change rapidly where the number of people seeking retirement advice that includes using equity release outstrips the number of advisers qualified to give it.

“An additional equity release qualification was proposed so advisers could receive an equity release qualification, without having to also hold a generic mortgage qualification. This simplification to the qualifications would have helped advisers meet the growing demand for a holistic approach to financial planning that includes equity release, whose popularity is growing at a serious pace.

“Already this year there was an unprecedented 61% increase in equity release activity in the first quarter compared to the first quarter of 2016, according to figures from the Equity Release Council.  This in part reflects housing wealth crucial role in the UK. A property is usually the largest asset individuals own and going forward it looks to be a fundamental means to fund retirement.

Recent research from Old Mutual Wealth and Tisa showed that people aged 50 and over were approaching retirement with a funding shortfall of £11,400 per year. These generations are increasingly looking to their houses to fill that hole in their retirement funding. When asked if the home should play a role in financial planning, 68 per cent of the 1,000 surveyed said yes.

“However, relying on your home in retirement is difficult and accessing it isn’t as simple as opening the right door. Advice is crucial. However, today retirement guidance services have limitations on how much help they can give on housing wealth. This thinking needs to shift and the regulator should be supporting that shift.”

Read ps17-11

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