14 September 2023

The FCA have just published their findings into their recent review of the equity release market in line with their objectives set out in their earlier business plan.

 

Whilst some firms copied may not currently be offering lifetime mortgages; I felt it prudent to share the findings to all as it should be of interest regardless. I will copy this information to our bulletin portal; but please feel free to forward to any advisors with CeRER.

 

A summary of the FCA’s findings is as follows;

 

Financial promotions

 

Financial promotions can significantly influence consumer understanding of the later life lending market, and of the options they have available. Despite clear and long-standing rules the review found many: 

 

  • inaccurate or misleading promotions  

  • product benefits being highlighted without any balancing description of the risks 

  • firms using their FCA regulated status in a promotional manner 

 

As a result of the review, almost 400 financial promotions have been removed or amended where firms identified issues with them.

 

Suitability of advice

 

The FCA have previously emphasised that to deliver suitable advice and help consumers make informed decisions, firms need to: 

 

  • personalise advice  

  • challenge customer assumptions  

  • have the evidence to support the suitability of advice  

 

The FCA were disappointed to find evidence of firms not acting on their previous findings. They found many examples where intermediaries were:  

 

  • poorly considering borrowers’ income and expenditure  

  • minimising discussions around alternatives 

  • incentivising sales potentially at the expense of quality advice and good customer outcomes

  • steering outcomes in favour of lifetime mortgage products  

 

As a result of the FCA’s work and subsequent interventions, all the firms included in the review have made changes to their sales and advice processes. The majority of firms also changed how they incentivise advisers. They expect other lifetime mortgage advisers to pay close attention to the review's findings and act immediately where they need to.

 

FCA Expectations

 

In combination, the Consumer Duty and FCA rules mean that lifetime mortgage advisers must: 

 

  • consider the information needs of consumers and communicate in a way which is clear, fair and not misleading, so that consumers are likely to understand communications

  • assure themselves that consumers get appropriate information about the overall proposition, in a timely and understandable format, to enable them to make effective decisions 

  • gather all relevant information to tailor advice to the consumer’s needs and circumstances ensuring recommendations are suitable

  • ensure balanced conversations and disclosures of the availability of alternative options 

  • ensure that commission received from providers is not prioritised over customers receiving good value. Any advice or arrangement fees should provide fair value to consumers and not cause the overall transaction to be poor value 

  • have appropriate processes to manage potential conflicts of interest and the risk of bias

  • monitor and regularly review the outcomes their consumers are experiencing in practice and take action to address any risks to good customer outcomes