Regulation and Equity Release Council standards in the later life lending market have played an important role so far in helping deliver good customer outcomes and positive change as the sector continues to grow and evolve.
Of course more needs to be done and there are still challenges to meet but it is extremely encouraging that the regulator is acknowledging the importance of housing equity in later life planning and, through its mortgage discussion paper, is engaging with the industry to help shape a market that functions better for all – especially customers.
More than ever there’s a clear need, and opportunity for advisers, to support a wider range of customers in a market that is going to need to expand to meet increasing demand and societal changes.
The mood music is positive
FCA chief executive Nikhil Rathi set the tone at the JP Morgan Pensions and Savings Symposium earlier this year telling his audience and the wider market: “As consumers may increasingly need their home to finance retirement welfare and lifestyle needs, should it become easier for customers to access their wealth? How could this option be made more attractive, and offer greater value? Regulators alone cannot solve this.”
The FCA’s Mortgage Discussion Paper (DP 25/2) published in June underlined the message stating that it “could be that older borrowers need more effective, holistic advice to overcome lack of awareness.”
Consumer group Fairer Finance has called for urgent action from the Government and FCA to “break down the barriers that prevent older homeowners from accessing the equity in their homes, and to integrate housing wealth into mainstream retirement planning alongside pensions”.
Its report “How can housing wealth bridge the later life funding gap?” highlights the role that later life lending is playing in the face of economic and societal changes. People cannot rely on pensions alone for retirement income but they do own property that could help.
The message is loud and clear that lifetime mortgages, and other later life lending products such as RIOs and TIOs, have a crucial role to play in meeting a growing customer need, supported by quality unbiased advice in order to deliver good customer outcomes.
However, many customers remain unaware of these options and advisers need to be proactive to ensure clients understand the options available to them in later life and the benefits and value they can deliver.
The range of later life lending products and their features having expanded over recent years but this isn’t always consistently understood and outdated perceptions remain. Direct engagement with trade bodies and/or the FCA as part of the Discussion Paper process is vital to help shape the evolution of the market.
Standards have not stood still but advice practices and regulation must continue to develop to ensure individual clients get the right advice on the right options for their circumstances, whatever they may be.
The Equity Release Council has developed its Customer Charter and continued to add new product standards supporting innovation and delivering improved customer outcomes – the new sixth product standard waives early redemption charges if a customer moves in with a relative for care.
That provides more flexibility and choice as well as support when customers are in a potentially vulnerable position. It also reflects changes in society with people living for longer but not necessarily being able to live on their own.
The Council’s new Consumer Charter also aims to give customers clarity over what to expect from their adviser through focus on the four Ts of Trusted, Tailored, Thorough and Transparent, helping them better understand their options before making a decision.
The Council’s recent mystery shopping exercise with 30 advisory firms showed how advice firms measures up to these standards. While the results included a lot of positives, and I recognise there will be nuances in each of the shopper experiences, they still left room for improvement, which we can’t afford to complacent about.
The FCA discussion paper comments that ‘previous supervisory work has found weaknesses in the quality of advice given by lifetime mortgage advisers’ – a reference to the review the regulator conducted in 2023.
As the sector challenges a broader audience of advisers to ‘consider all options’ for older clients, specialist equity release advisers must ensure they are doing the same. Standards must be lived and breathed in every customer interaction and reinforced by firms’ own governance frameworks and outcome monitoring procedures.
There is plenty of support available so firms must reach out and ensure they have the processes in place to demonstrate the delivery of consistently good customer outcomes regardless of the product initially enquired about.
