Later life advice needs to keep up the momentum of change to satisfy FCA review

"The FCA is going to continue to keep a keen eye on the industry and, in that sense, will continue to focus resources on this part of the market."

We have known for some time the FCA were on the verge of completing a review into the provision of lifetime mortgage advice, whether it was suitable and tailored to individual circumstances, and – in this case – the advertising being utilised in this space.

That review has now been completed and the regulator provided its key findings earlier this month, which should no doubt interest all existing advisers active in this space, and those who might be considering a foray into later life lending advice.

In terms of the results of this review into later life advice, it is never welcome news to see a report which highlights the perceived failings of an industry, especially in light of the recent Consumer Duty rules which focus on positive consumer outcomes.

Indeed, in terms of the build up to Consumer Duty, and the clear messages that were being put out to advisory firms in terms of their ongoing compliance with it, these key findings on the suitability of advice should be very familiar.

While it is concerning the review flagged up firms which it felt were not acting on its previous findings, it is positive to note all firms included in the review have already made changes to sales and advice processes to address these points, as well as making changes to the way they incentivise advisers.

It's important now that our sector continues to build on this work and consider how we avoid the behaviours called out in the review if they continue to be evident in a firm’s approach.

It is clear however that the FCA is going to continue to keep a keen eye on the industry and, in that sense, will continue to focus resources on this part of the market.

In this particular review, the FCA remain concerned about: a lack of personalisation when it comes to individuals and the advice they are getting; whether firms are challenging customer assumptions about the sector and products enough; and whether firms have sufficient evidence to justify and support the suitability of the advice they have presented.

These areas are already firmly on advisers’ radars, and Air as a business has been equally focused on making advisers aware of their responsibilities in these (and other) areas. Much has been achieved, but the FCA findings show that we cannot afford to let up on this momentum.

Perhaps notably, this matters in terms of not just defaulting to a lifetime mortgage recommendation.

Particular focus from Air to its members has been focused on how to be active and able to advise in other product sectors and ensuring the customers’ finances are fully considered. This is directly relevant to the customer understanding principle in the Consumer Duty, especially when servicing interest on a lifetime mortgage and whether other options such as mainstream mortgages or RIOs, might be more suitable.

Just recently, we have focused on supporting advisers in these very areas, and have recently launched our ‘Navigator’ tool which initially is focused on two advisory needs, namely using top level affordability considerations to narrow down the range of potential products suitable for that client, and secondly, helping them easily compare borrowing costs across lifetime mortgages (both with repayments and no repayments), residential mortgages and RIOs.

Our aim here is to tackle that regulatory concern highlighted above, namely that certain advisers are simply defaulting – in advice terms - to lifetime mortgages without looking in the round at either the client or the other options available to them.

To provide the best support for our sector, we’ve made a conscious decision at Air this year to no longer deliver ‘equity release advice’ but ‘later life advice’ and that means focusing on all the available options in later life lending, not just lifetime mortgages.

Overall, this is another regulatory review to take heed of. It’s positive to hear firms who took part in the review have already made significant changes, and many more will have done so as a result of their need to comply with Consumer Duty.

However, the regulator could not really be more clear here, and I would strongly advise all firms to take heed and to ensure they are not caught on the wrong side of these requirements in any further review.