Advisers urged to be on alert over property plan

Equity-release specialists have warned advisers to be wary of a new unregulated property income plan from new property company Equity IQ.

The product literature says the plan allows clients to release a monthly income from their homes without building up debt or having to make interest payments. The income is paid through Equity IQ from an insurance company. Equity IQ will package plans and license them to an insurance company to allow the insurer to show the property’s value as an asset on its balance sheet. The insurance company will take a first charge on the property for the three-year duration. The plan is available only on mortgage-free properties.

Gateway Consortium, which is promoting Equity IQ, is chaired by LIA founder Clive Holmes who worked as an external training consultant for now defunct IFA network Berkeley Independent Advisers when it was publicly censured by the FSA over misselling whole of life policies and regular savings plans between 2001 and 2004. Holmes trained members to sell whole of life products as an alternative to personal and executive pension plans, describing pensions as a “sterile product”. He said his training was not at fault and it was the network’s failure to monitor their members’ activities that caused the problems.

The FSA cancelled Berkeley Independent Advisers’ permissions to conduct regulated activities in March 2006.

LaterLiving equity release planner Simon Chalk says: “Advisers considering this plan must check their professional indemnity will cover them because it probably does not at present. I urge advisers to tread cautiously and stick to considered best practice in equity release.”

Safe Home Income Plans director general Andrea Rozario says: “I would proceed with caution.”

Independent Equity Release Adviser Alliance spokesman and IFA Dermot Brannigan says: “The fact that the product is unregulated should tell the consumer everything they need to know. There is no point in bothering with it because if it does go wrong you are up a creek without a paddle.”