Whether they’ve been a regular customer for years or someone who has just walked through the door, advisers need to fully understand their clients’ needs – and that includes identifying whether someone is showing signs of financial vulnerability.

While advisers have years of experience recognising the signs of customers struggling to cope, even the most experienced may need support, particularly when the pandemic has created a whole new set of pressures.

The pandemic has caused a shock to the country’s finances, but it has also coincided with a dramatic rise in house prices, fuelled in part by the government’s stamp duty holiday. This overarching uncertainty has caused a surge in interest in equity release, as many older people seek to capitalise on high house prices and secure their own finances in their later years.

A recent report published by Responsible Life showed there has been a ‘middle class stampede’ towards equity release. Over 55s are releasing more cash from their homes than ever before, as the firm reported a 31% spike in the average amount released by its customers. This figure has increased from £86,000 to £112,700 in the year to April 2021.

According to the Office of National Statistics, house prices in the UK rose by 10.2% in the year to March 2021. This was the highest annual growth since August 2007 and, combined with historic low interest rates, this has persuaded many people to turn to lifetime mortgages.

Equity release is booming among the older generations, with the over-80s one of the fastest growing users of the product. But these groups of people are the most likely to be considered vulnerable, especially as the cash released is often used to fund care costs in older age.

The Financial Conduct Authority warned last year that more than half of adults had started to show signs of financial vulnerability. This is three million more than before the pandemic arrived in Britain. As such, it is critical that brokers are able to assess the vulnerability of their clients and ensure they are making the best financial decisions.

Although house prices are rising and interest rates are falling, this situation could easily reverse. The prospect of rapidly rising inflation is also a major concern for those entering retirement, as they may soon discover their retirement pot is unable to cope with the increased costs of living.

Brokers must therefore ensure that they are considering how their clients’ circumstances could change, including whether a capable customer today may become vulnerable in the future.

We know brokers already make these assessments every day, but technology can help ensure they are making the best decision for both themselves and their clients. Digital platforms such as Comentis can help make client assessments much more robust and auditable by using a tech-driven, clinical approach to identify potential client vulnerability.

For advisers, this can be a particularly helpful tool when identifying low financial resilience or capability among clients – two of the main drivers of financial vulnerability according to the FCA.

This technology makes it much easier to identify customers showing signs of vulnerability or those who may be susceptible to these issues later. Advisers can be sure that any decisions are making the best decisions possible.

And the software provides consistency and objectivity to a process notoriously prone to misinterpretation and subjectivity. These assessments also allow the development of vulnerability dashboards, which may be of particular use to multi adviser firms.

The FCA has made it clear that it considers financial vulnerability a major issue and could take further action if brokers are found to be failing these customers. As such, firms must be prepared for further regulation. This could include tightening existing rules, particularly if house prices continue to rise and this prompts more people to turn to equity release.

This burgeoning industry offers great options for older homeowners in need of cash – but brokers need to ensure that it’s the right solution for their client. Firms will therefore need to tighten their standards, ensuring vulnerable clients are fully protected, both now and in the future.

Comentis co-founder and chief executive Jonathan Barrett