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Advisers urged to be on alert over property plan

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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.”

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Readers' comments (2)

  • It's incredible that this plan can be allowed to go forward.

    1 How can an insurance company put the "asset" on its balance sheet? It has to be that the company can (and will if necessary) force the sale of the home, leaving the homeowner disposessed and (probably) short of the money needed to buy another home.

    2 How is it that the FSA hasn't jumped on this immediately? Every now finished equity release scheme in the past 30 years has ended up as a miss-selling scandal.

    This is yet another accident waiting to happen...

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  • I suggest that Norm d'Plume aims his questions at Gateway or Equity IQ as his answers are freely available.

    At this time there are many potential distributors waiting for the final information to enable them to complete their due diligence and then, when all the information is available, professionals will be able to offer an opinion that has some grounds.

    Commenting on the equity release professionals I would concur that because of the scheme duration it does not fit under "equity release". However, from what I have seen, this offers a great opportunity for many owners of unencumbered property to access a return that is only usually available to those that have liquid capital.

    This is a new concept and as "Norm" demonstrates so very clearly, new ideas are frequently met with cynicism rather than being understood, welcomed as innovation and supported.

    I suggest we sit tight and wait until the provider is able to supply full details before ill-informed commentary is made.

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