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FCA intervention in later life mortgage industry

The Financial Conduct Authority has been intervening in the later life mortgage space due to poor advice and misleading promotions.

The equity release market works by enabling older people to free up money locked in their home to pay for later life needs.

However, the regulator said later life brokers have commonly failed to properly consider borrowers’ income and expenditure; they aren’t sufficiently discussing alternatives; they’re unduly favouring later life products; and they’re incentivising sales potentially at the expense of quality advice and good consumer outcomes.

The FCA said: “We expect other lifetime mortgage advisers to pay close attention to the review’s findings and act immediately where they need to. Anyone who believes they were poorly advised can complain to the firm and, if they are dissatisfied with their response, to the Financial Ombudsman Service.”

As a result of the probe the FCA said some firms have changed how advisers are incentivised.

The regulator told consumers to contact the Financial Ombudsman Service if they feel they’ve been poorly advised.

Promotions of later life lending were also called out as inaccurate or misleading; with product benefits being highlighted without any description of the risk; as well as firms using the fact that they are FCA regulated in a promotional manner, despite that being a minimum requirement.

Some 400 promotions have been removed or amended thanks due to action from the regulator.

Sheldon Mills, executive director of consumers and competition, said: “Releasing money tied up in your home later in life is a big decision and can have a financial impact on consumers and their families well into the future.

“Our review led to the largest later life mortgage firms making improvements to their sales and advice practices, and almost 400 promotions have been removed or amended where firms have identified issues with them.

“We expect all firms to assure themselves they comply with existing rules and guidance and higher standards under the consumer duty.”

Paul Glynn, chief executive of Air, said: “Any Financial Conduct Authority announcement which highlights perceived failings in an industry is never welcome news, but the FCA did note that all firms included in the review have already made changes to sales and advice processes to address these points. Our sector needs to build on this work and consider how we avoid the behaviours called out by the review if they are evident in a firm’s approach.

“Given the recent introduction of Consumer Duty legislation, advisers are already stepping up but robust compliance, clear documentation and a commitment to ongoing education and training need to be part of a firm’s DNA. Whether you choose to use resources or training from platforms such as Air or look directly to lenders for insights, there is a significant amount of resource available.

“Advisers who operate in the later life lending market understand their responsibility in helping older homeowners make the right choices, so we need to actively consider how we personalise, achieve, and document this.”