The Financial Conduct Authority (FCA) has warned that equity release advisers are offering advice that is “not up to scratch.”
In its latest review published today, the regulator said that while equity release worked well for many consumers, it had found three “significant areas of concern” which could pose potential harm to consumers.
The FCA said in some instances, the advice given was not in the best interests of the consumer and expressed disappointment that advisers had failed to take into account the personal circumstances of clients, largely adopting a form-filling approach to fact-finding.
According to the FCA, it also found evidence of advisers who had failed to challenge the reasons behind a consumer’s decision to apply for equity release.
Its findings showed that advisers appeared to rely solely on customers’ initial stated preferences, without taking any steps to assess whether the product was appropriate for their individual circumstances or why customers had those preferences.
The warning came as the FCA confirmed it will be carrying out more detailed follow-up work into the suitability of advice as part of its ongoing supervision of mortgage intermediaries.
Jonathan Davidson, executive director or supervision, retail and authorisations, FCA, said: “Deciding to enter into a lifetime mortgage is a big decision with a big financial impact for consumers. In many instances it makes sense but whether it does or not depends on personal circumstances and how they might change.
“It is therefore critical that advice offered to consumers looking at lifetime mortgages is suitable to their personal circumstances. It is clear from our review that advice being offered to such consumers, including some vulnerable consumers, is still not up to scratch.”
The FCA urged firms to ensure their advice processes, including how they record the suitability of advice, are sufficient.
