The firm has launched an affordability tool, which is available on its adviser portal. It incorporates a fact find, product research and sourcing as well as suitability report templates.
Key has trained its advisers to use the tool so they can include it in the advice process.
The firm will put all of its clients through an affordability assessment which will help to determine the most suitable product and advice route.
It will look at what repayment structures its clients can manage to assess whether a standard mortgage or retirement interest-only (RIO) product will fit their needs.
Key will also make use of its referral partnerships so it can recommend pensions or investment advice, long-term care funding and debt management solutions.
The firm said Consumer Duty rules placed a “higher bar” on the financial services sector and highlighted the importance of advice over sales to deliver good customer outcomes.
Key said it reviewed its practices in preparation for the regulatory change and considered the flexibility of modern equity release products as well as future product innovation.
Its updated advice process will make sure that personalisation is prioritised and any product bias is “challenged to ensure that a balanced view of all alternatives is properly considered”.
Key said it would eventually publish a customer charter based on this approach to set client expectations for what they should expect during the advice process.
Three objectives
Affordability, personalisation and supporting understanding make up Key’s three objectives for its advice process.
As part of the supporting understanding objective, the firm will fully explain the impact of compound interest as well as the effect of adding fees over the lifetime of the loan so clients are aware of all the costs. It will also recommend an option that meets a client’s needs at the lowest borrowing cost.
Key will make sure clients consider a drawdown if they do not immediately need the funds requested and inform them not to borrow more than they need.
It will also implement at least a two-stage advice process, so the client has the time to consider their options. This will be adjusted to accommodate any vulnerabilities.
The affordability objective will ensure that if a client can make repayments, they are recommended to explore that option first. If they have additional income, Key will explain the advantages of using that income to make repayments.
The personalisation objective aims to make no assumptions about the product that is eventually chosen until all needs and options are assessed, including ones that do not require a lending product.
The firm will discuss alternatives and challenge the customer to confirm that they have fully considered the available options.
Key will also work to give clients a balanced view of all lending options.
A renewed advice philosophy
Will Hale (pictured), CEO at Key said: “As with other advice firms, we fully reviewed our advice philosophy and processes ahead of the introduction of Consumer Duty and have made changes which are designed to align with the required transition from treating customers fairly to providing good customer outcomes.
“With the range of options currently available, there is often no one single right answer and an adviser’s recommendations need to evidence consideration of all of the potential implications and why the selected option is judged the most suitable.”
He added: “In a rapidly evolving later life lending sector, this makes providing the best advice complex and requires consideration of a matrix of different risks and benefits.
“With equity release products typically not requiring mandatory repayments, affordability has not always been front and centre of the advice process for firms specialising in this sector. However, with an ever more diverse profile of customers, a wider range of products, and further innovation on the horizon, we are committed to evolving our approach to keep pace with changing needs, a growing market and the heightened expectations of Consumer Duty.”
