The Financial Conduct Authority [FCA] recently announced plans to drop its suggestion of a compulsory standalone qualification for the equity release market. Although there was much rejoicing in many quarters, others thought the U-turn was a backward step. It seems that the subject of additional qualifications is one of those Marmite subjects – advisers either embrace the need for continual professional development supported by independent accreditation or they come from the, ‘I learnt in the university of life’ camp and take the view that their ‘experience’ will see them through.
Of course, there are already many opportunities for the Marmite lovers to satisfy their cravings.The London Institute of Banking & Finance (Institute of Financial Services to you and me) run a certificate in regulated release [CeRER] for those who have already passed the Certificate in Mortgage Advice and Practice [CeMAP]. The Chartered Insurance Institute [CII] also offer a certificate in equity release, for those who have passed their level 3 version CeMAP.
So, despite the FCA U-turn there are plenty of opportunities for advisers to demonstrate that they have taken part in a structured learning programme and evidenced their completion of that programme, showing in a tangible way competence to an agreed level.
there are plenty of opportunities for advisers to demonstrate that they have taken part in a structured learning programme
There is little doubt that equity release/lending into retirement type advice is becoming an increasing area of financial need as our changing demographic makeup results in an ageing population who are increasingly asset rich and income poor. There is also a growing market of interest only borrowers who are reaching the end of their existing mortgage with large amounts of equity, but no means to pay off the existing loan. In giving advice in this area advisers should consider that such customers are likely to be categorised as vulnerable customers.That statement might initially sound odd as I have already said such customers are likely to be asset rich and do not, therefore, meet the populist image of a vulnerable person. However, thinking about these customers more holistically – they are likely to display at least one of the following characteristics:
- They are likely to have limited knowledge of the product being bought/arranged
- There is a limited choice of product suppliers in this market
- The customer is under pressure to arrange the product.
Therefore, they tick the potentially vulnerable customer box.
Maybe, it is not surprising, therefore, that the Financial Ombudsman Service [FOS] statistics show that 5% of complaints from over 65 year old customers relate to mortgages! While at the same time around a third of all mortgage complaints to FOS in respect of mortgages are upheld in favour of the customer.
So what should advisers consider when being involved in equity release/lifetime products? Certain key FCA principles grow in importance when advising in these business areas and to vulnerable consumers. These include, to name just a few, ‘Fair treatment of consumers’, marketing and literature should be ‘clear, fair and not mis-leading’ and ‘treating customers fairly’ Firms should challenge their own behaviours, processes and procedures.Â Do they provide clear explanations? Is their marketing unclear and confusing? Are these products likely to cause confusion and mis-understanding? Are sales and marketing processes inappropriate to the audience? Do technological advances exclude the target audience? The list could go on, but firms who undertake such analysis are more likely to be competent in this market, whether or not the FCA demands a formal examination structure to demonstrate competence. The more in tune firms are to the needs of any target market the more likely they are to satisfy that market in a compliant complaint free manner. That sounds like a win/win situation. Good for firms and good for consumers!