The regulator has called on firms in the sector to ensure they always give appropriate equity release advice after uncovering incidents where guidance was not in the best interest of customers based on their personal circumstances.

Although the FCA’s review found the market to be ‘working well’ for many consumers, it raised three areas of concern:

• Advice given by firms did not always sufficiently take into account consumers’ personal circumstances
• Consumers reasons for looking at equity release were not always challenged by firms
• Firms weren’t always able to evidence that their advice was suitable

In its report, which you can read in detail here, it said there was evidence advisers had largely adopted a ‘form-filling’ approach to fact finding.

There were examples of debt consolidation not being explored properly, the FCA revealed, and advisers making recommendations about changes to property ownership.

The regulator was also concerned some advisers were relying too heavily on Key Facts Illustrations (KFI) to show customers the implications and costs of taking on a lifetime mortgage.

However, the FCA highlighted it had also identified some good practice in this area where advisers were supplementing the KFI and were taking time to ensure customers completely understood the long-term effects.

Jonathan Davidson, the FCA’s director of supervision, retail and authorisations, said: “Deciding to enter into a lifetime mortgage is a big decision with a big financial impact for consumers.  In many instances it makes sense but whether it does or not depends on personal circumstances and how they might change.

“It is therefore critical that advice offered to consumers looking at lifetime mortgages is suitable to their personal circumstances.  It is clear from our review that advice being offered to such consumers, including some vulnerable consumers, is still not up to scratch.”

Response from the equity release sector

Davidson called on all equity release firms offering the products to read its review and take action to ensure customers were receiving advice ‘tailored’ to their personal circumstances.

In response to the review, David Burrowes, chairman of the Equity Release Council, pointed out equity release made up fewer than 2% of complaints about home finance products and of 38 complaints made to the Financial Ombudsman Service in the last year only two were upheld.

Borrowes added: “The FCA’s report found that equity release is ‘working well for many consumers’ by helping to meet important social needs, from boosting retirement income to funding home improvements, repairs and adaptations.

“We will continue to work with members and the wider market to make sure this is a universal characteristic, by developing and embedding best practice standards which we would like all firms to sign up.”

He said the FCA’s advice would inform its ongoing work to support advice standards across the industry.

Burrowes added: “The combination of FCA regulation and Equity Release Council standards provides three levels of protection for customers, including independent legal advice alongside regulated financial advice and clear product safeguards. The requirement for customers to receive independent legal advice is unique among mortgages and helps to ensure customers understand the product and are under no duress or coercion to enter into the contract.”