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Sesame places ring of conditions around retirement interest-only advice sales

  • 08/08/2018
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Sesame places ring of conditions around retirement interest-only advice sales
Sesame is restricting how its appointed representative (AR) advisers conduct sales of non-lifetime mortgages to customers aged over 70.


Sesame will require advisers without the lifetime mortgage qualification to contact its helpdesk before completing a retirement interest-only (RIO) mortgage to a customer aged 70 or older.

ARs with the lifetime mortgage accreditation can complete all applications by customers whatever the age.

All advisers will be allowed to complete retirement interest-only mortgages for customers under 70-years-old.

The network told Mortgage Solutions it had been discussing the situation with lenders as they enter the market to ensure consumers were receiving appropriate advice and that brokers were protected.

Sesame head of compliance Carl Wallis said: “The risks of RIOs are similar to those of lifetime mortgages in that releasing the lump sum could have an impact on the customer’s state benefit and tax position, so because the risks are similar we need to put safeguards in place.

“If it’s clear to us that a lifetime mortgage is unlikely to be suitable or RIO is likely to be more suitable we still allow the advice to continue – for example where the customer is just looking to flip the current interest-only into a RIO and not raise any capital.

“That’s the only restriction we have in place and we have processes where advisers can still give advice if it’s likely to be suitable, so I don’t think we overly restrict them,” he added.


Responsibility for consumers and advisers

The network is also considering how best to support brokers when dealing with enquiries from older customers where their tax or state benefits situation may be affected.

“We think the processes need to be better for the customer than the Financial Conduct Authority (FCA) is currently suggesting, so we are currently looking at processes to resolve those issues,” Wallis said.

“We’re looking at where systems can help advisers do that and also developing a later life hub on our website which will ask advisers who want to become active in that area to go on and do those courses.

“Our stance is developing with the market and we don’t think its overly restrictive, but we do have a responsibility to make sure it’s working better for consumers and that advisers are protecting themselves and they understand the risks.

“Day-to-day I don’t think most mortgage advisers are used to releasing a lump sum for anything than buying a property, so it is different,” he added.


No significant risk

Other networks contacted by Mortgage Solutions said they were aware of the concerns and had made advisers aware of the situation, but did not believe there was a significant risk at present.

Intrinsic mortgage and protection network managing director Gemma Harle said the firm is not restricting its ARs, but agreed that the industry should be looking at the product differently to a usual mortgage.

However, she believes there is no need to be concerned about the emerging product as it includes the usual affordability checks, documentation and fact finds to keep the customer informed.

“We’re not looking to licence our ARs, but we’re different as a high number of our mortgage advisers are financial planners too, so we see this as an additional product to the financial planning space,” she said.

“I don’t think its necessarily at the point of sale that the challenge will be, it will be as the customer gets older and the risk of the customer becoming vulnerable while they still have a mortgage is higher.

“So because financial planners do annual reviews they are closer to the customer and much more equipped to do that,” she added.


Equity release reminder

A Tenet spokesperson said the network had updated its policy to recognise the RIO mortgage and highlighted some of the potential areas where there could be risk, such as remembering to flag that an equity release product may be more appropriate.

“We will keep the matter under review and act if we identify emerging issues but for now, having set our policy in accordance with the rules, we do not anticipate problems where advisers act in the best interests of their clients,” they added.

L&C Mortgages associate director, communications David Hollingworth said the broker had taken similar measures to ensure that customers understood that lifetime mortgages may be an option.

“Where customers do want to explore the options in the traditional equity release market we are able to refer to a specialist in that area,” he said.

“We also require advisers to make it clear to those looking to borrow additional funds to make sure that they take appropriate advice on the potential impact from a tax and benefits position.

“This sits alongside our policy to help identify vulnerable clients, which is designed to ensure that those customers can be dealt with in an appropriate fashion. Clearly not all older borrowers will be vulnerable but this helps to flag where there may be a need to take a particular approach in how we deal with those customers,” he added.






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