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Transparent adviser-lender ties will improve equity release outcomes – LiveMore

  • 30/06/2022
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Transparent adviser-lender ties will improve equity release outcomes – LiveMore
Greater transparency around the higher procuration fees paid to brokers by lifetime mortgage providers could help clients understand what may drive the sale of one product over another, LiveMore has suggested.


Responding to the Financial Conduct Authority’s (FCA’s) ‘Dear CEO’ letter about the potential risks posed to borrowers by later life provider practices, LiveMore’s chief executive Leon Diamond (pictured) agreed with the regulator’s position. 

The FCA said financially vulnerable borrowers could be at risk of choosing unsuitable equity release products. It also noted that some borrowers were being offered certain products due to commercial relationships between lenders and advisers. 

Diamond said greater transparency around the relationships brokers have with later life providers would give borrowers a better oversight as to why some products were suggested to them. 

He said: “The FCA letter states that lifetime mortgage lenders have challenges around customer vulnerability, product design and governance and its relationship with intermediaries, particularly where there may be conflicts of interest, either due to high procuration fees or advisor-provider relationships. This can be evidenced by the fact that procuration fees for lifetime lenders are materially higher compared to the mainstream market.   

“We all want the later life lending market to succeed as we see it as an underserved section of the mortgage market. However, we all need to ensure greater transparency occurs and that intergroup payments need to be made visible. Consumers can then understand better what might be driving the sale of one product type over another.” 

Diamond also called for simplified early repayment charges by getting rid of “complex and difficult to understand” mark to market penalties. He also said more should be done to encourage switching to foster better value for borrowers. 


The easy option 

Diamond said there was a risk of lifetime mortgages being sold as the “easy option” because often, no affordability checks are performed.  

He added: “We think it is important that all options are considered so that the mortgage fully meets the customer’s needs.  

“This means that in practice serviced interest options should always be considered – something the FCA review of selling practices in this sector highlighted back in July 2020.” 

Diamond said borrower interests were best served through impartial advice and a review of all suitable options, such as a mainstream mortgage with a retirement interest-only (RIO) product. 

He said this approach would achieve the regulator’s proposed Customer Duty changes. 

Diamond added: “We often hear of examples where customers are directed to one solution and often that is a lifetime mortgage by questions like, ‘would you prefer to have a guarantee that your house can never be repossessed?’ or ‘would you prefer a mortgage where there are no monthly mortgage payments?’ These are closed questions and how many consumers would honestly answer ‘no’ to either of these? 

“We look forward with interest to see how the lifetime lenders meet the challenges set by the FCA.” 

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