FCA review of equity release advice

The FCA has published the findings of its review of firms’ processes around advice and sales of equity release. The findings formed part of a wider review which sought to better understand the later life lending market and identify and reduce potential harms for customers looking to access lending in later life.

The FCA found that equity release is working well for many customers, seeing some good outcomes where equity release products met the long-term needs of the clients. However, there remains concern that advice may not always be in the customer’s best interests.

The FCA is urging advisers to work with consumers to ensure they realise the implications of decisions around equity release and can evidence how they concluded that the product was suitable. The three significant areas of concern regarding the suitability of advice identified were:

  • insufficient personalisation of advice;
  • insufficient challenging of customer assumptions;
  • lack of evidence to support the suitability of advice.

Firms should read the review and ensure they meet the FCA’s expectations and are providing good quality outcomes for all consumers.

Next steps
The FCA will be addressing their findings with the relevant firms and, as part of ongoing supervision of mortgage intermediaries, will be undertaking further work to review the suitability of advice in this area. 

The FCA expects firms to ensure that advice processes, including how  suitability of advice is documented, are sufficient. Although MCOB sets out the FCA’s expectations in detail, they have also stated that:              

  • Firms need to ensure that they take reasonable steps to obtain sufficient information from customers to provide advice;
  • When giving advice to enter into an equity release transaction (for the first or subsequent time, including making amendments to existing products), firms should ensure the advice given is suitable;
  • Firms should ensure that they collect and retain the necessary evidence to support that assessment of the suitability of advice and how it was determined.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

The FCA found examples of good customer outcomes, where equity release products met their needs. Robust advice and recording processes will provide the evidence required to support equity release recommendations that are in the customer’s best interest.

Action Required By You

Firms providing advice in this area should:

  • read the FCA’s review;
  • ensure advice processes are robust and fully address the requirements of MCOB;
  • ensure that the recording of the advice process supports the recommendation.  

If you would like assistance with reviewing your processes, contact your ATEB Consultant, or contact ATEB directly.

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Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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