Suitability reports for potential equity release borrowers should be personally written and remain focused so they are easily read and not too long, the ERC emphasised.
New guidance from the ERC also highlighted how a strong fact find should not be intrusive but “allows advisers to make a bespoke recommendation based on the customer’s personal circumstances”.
“Customers should be reminded that it is the adviser’s job to ask questions, probe the answers, document the response and make a recommendation based on the customer’s short, medium, and long-term needs, objectives and personal circumstances,” the ERC said.
And advisers must “ensure any discussions are fully documented and include any soft facts that capture the customer’s voice and thoughts”, the trade body added.
FCA spotlight
The guidance is a follow-up to the 24-point advice checklist issued in the summer to ensure advisers are operating appropriately and giving suitable advice after the regulator raised concerns.
The equity release advice sector has been in the spotlight this year after a Financial Conduct Authority (FCA) report highlighted shortcomings in the sector following a review of the biggest advice firms.
It reiterated these concerns in a Dear CEO letter and announced intentions to further review the sector next year.
Some within the industry claimed the FCA was only worried about those ‘dabblers’ in the market.
However, writing in Mortgage Solutions last week, Association of Mortgage Intermediaries (AMI) chief executive Robert Sinclair made it clear the regulator had concerns across the board including with the largest firms.
Throughout its guidance the ERC reminds advisers that they must include whether a retirement interest only mortgage (RIO) or alternative later life mainstream product might be more suitable or whether short term debt solutions could be appropriate.
And when recommending an equity release product “all alternative lending options must also be ruled out”.
Advisers must also be able to encourage customers to seek out advice on other areas such as using pensions, investments, means-tested benefits, and the impact on their tax situation if they are not qualified to do so themselves.
Vulnerable customers
Addressing vulnerabilities and being assured that the customer understands what they are doing are also important elements of the advice process.
The ERC guidance states that at the beginning of the meeting, advisers should explain the questions are not intended to be intrusive but have been designed to provide the most appropriate advice.
“Asking customer’s personal questions, in relation to vulnerability, is difficult but remember that the customer’s wellbeing and the right outcome is of paramount importance,” the ERC said.
It also emphasised that vulnerable customers “need care, patience, support and guidance” and that the adviser should ensure friends or relatives are present, at the customer’s request.
“Consider shorter and more frequent meetings at a time of the day that suits the customer,” it continued.
And vulnerable customers must be given time to consider the adviser’s recommendations with several days’ grace between recommendations and any applications.
Provide personalised advice
ERC standards board chairman Chris Pond said the guide would be a valuable resource for new and experienced advisers as they seek to provide personalised advice to consumers and document their conversations.
“Our standards are based on extensive consultations with members and input from external parties, including the regulator,” he said.
“We support the FCA’s efforts to ensure all customers receive suitable advice on their options in later life.
“Our Checklist for Advisers and Best Practice Guide help to ensure a wide range of factors are explored in depth to identify the most appropriate way forwards to meet each customer’s long-term needs.”
