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Industry backs standalone equity release qualification

by: Heather Greig-Smith
  • 12/01/2017
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Advisers believe bespoke equity release qualifications are needed, according to an industry survey.

The Society of Mortgage Professionals (SMP) and the Personal Finance Society conducted the survey of 1,000 members in the wake of the Financial Conduct Authority’s (FCA’s) announcement that it will consult on the merits of a standalone qualification for equity release.

Of those questioned, 61% said they thought it should be a separate top-up to existing pension and investment qualifications.

The majority (77%) believe investment advisers that don’t currently hold mortgage qualifications, particularly those active in giving later life advice, would seek to acquire a standalone qualification.

When the Appropriate Examination Standards (AES) for equity release were first developed they built on an existing knowledge of mortgages, as mortgage brokers were the primary distributors of equity release products. However, the need for a wider mortgage qualification may be a deterrent to independent financial advisers, said the SMP.

SMP operations manager, Vishal Pandya, said: “Our on-going work looking at competition in the UK mortgage market has confirmed that many stakeholders believe that some independent financial advisers may not be offering equity release because they need to be appropriately qualified for a product (mortgages), that otherwise they have no interest in selling.”

However, while a standalone qualification could increase the number of advisers that can recommend the product in the long run, Pandya said there may be problems if the advisers doing so were not suitably knowledgeable about conventional mortgages.

Any re-fashioning of content or decoupling of equity release from the mortgages unit would need to be designed with sufficient mortgage content in the equity release component, in order to guarantee proper levels of competence and the fair treatment of customers.

“This would be crucial due to the strong links between mortgages and equity release, particularly in respect of some of the newer mortgage products available to older borrowers,” said Pandya.

“In the third quarter of last year alone, the value of equity release lending increased by 26% year-on-year to £571.6m. It is no longer a niche market and the adviser community needs to reflect this by giving serious consideration to a new qualification.

“That being said, it seems unlikely that there would be an immediate surge in numbers in what is still deemed to be a specialist area with a relatively limited, albeit growing, market share.”

Recent research suggested there is increasing demand for equity release from interest-only borrowers and that government should be doing more to educate consumers on equity release options.

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