Today, the ERC announced it updated its adviser checklist requiring brokers to establish vulnerability in clients and highlight differences between a new and existing plan.
So this week, Mortgage Solutions asked: What recommendations would you make to rework equity release advice and how do you put that into practice already?
Simon Chalk, managing director of Laterliving Now
Having spent over 17 years encouraging self-improvement in equity release advising, the FCA’s published findings come as a great disappointment, but sadly not a surprise.
A lifetime mortgage is a flexible later life, retirement and estate planning tool, requiring the adviser possesses greater knowledge and skills than for that of any other mortgage contract.
Better training and testing are required on mental capacity, vulnerability, estate planning, wills, trusts, the workings of – and interaction with – the social care system, powers of attorney and Court of Protection.
Requiring new and existing advisers to attain a higher competence level, involving an enhanced equity release qualification to Level 4, with examinations on case studies using written essay-style question and answers, would be an improvement.
At Laterliving Now, our advisers are called ‘Laterliving Planners’, emphasising these higher skills and the need to plan for our clients’ futures.
For example, we have all committed to taking a long-term care qualification, are trained on vulnerability, as well as being registered ‘dementia friends’ and ‘friends against scams.’
The introduction of the Later Life Lending Advice Standard from the Society of Later Life Advisers (SOLLA) will go a long way to improving things, as a good adviser will always seek to push themselves further.
It has not previously been in the interests of providers, nor the Equity Release Council, to set the bar higher, yet the FCA has signalled its intent that this needs to change, or it will do it for us.
Andy Wilson, director at Andy Wilson Financial Services
The FCA review provides an up to date benchmark of where my own advice process should be, and it has been useful to test mine against what they are looking for.
Detailed fact finding is vital, and I would like to think I properly address this.
I add a lengthy file note to the more structured fact find document, to detail my conversations with clients, and add relevant ‘soft facts’. I picked up that the FCA would like to see more detail around the words the clients actually used to describe their situation, and their thoughts on various aspects of equity release.
Providing evidence as to why advice is suitable can be easier than proving why other solutions might not be.
I have had to challenge my own wording where other alternatives have been dismissed, and I will need to expand on exactly what the clients said about this. The same is true for those who refuse to make any payments to the plan, even if they appear to be able to afford to do so.
When recording whether the clients have discussed plans with them, it is not sufficient to accept that they did not wish to do so, without questioning why.
Detailing the reason parents have kept their intentions from children will become very relevant once the parents have died. I think advisers must try harder to get the beneficiaries involved at outset.
This is also why the suitability reports need to be detailed as it will not only be the clients who read it.
I am therefore undertaking a review of my own suitability reports, to reduce the length, include some graphics to break up the pages of plain text, review standard paragraphs and change the order of information so the actual product details are placed nearer to the front.
Martin Wade, director of Access Equity Release
Making the equity release qualification a requirement for all mortgage advisers would be a very good first initial step.
Likewise, ensuring the advice process for equity release includes mandatory affordability checks on alternative solutions such as repayment mortgages and retirement interest-only mortgages, alongside a more in-depth knowledge of pensions.
More detailed product awareness and improved later life financial planning, discussed earlier in life would most certainly help.
Advisers should have a solid understanding of mortality, the cost of care, inflation and the physical ageing process. This would assist the ethical adviser in ensuring clients are counselled wisely about the years ahead, so they do not overextend themselves.
We need to ensure that retirement planning is knitted together so that all products and assets are assessed and brought into play.
The equity release market presently offers excellent choice and solutions, it is only by ensuring continuous education and CPD by those who are involved at the point of delivery, we can ensure each client has their full range of options available to them explored, included or discounted but used appropriately.
Our advisers will only see two or three clients a week; they invest time during those meetings to fully understand both the clients’ holistic financial position as well as their understanding of equity release.
Each case is then discussed individually with their development manager prior to any solution being recommended and each solution is reviewed again by our compliance department prior to completion for accuracy, suitability and accountability of advice.
