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Ship hits out at FSA's outdated equity release stance

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Andrea Rozario has attacked the FSA’s “outdated” stance on equity-release products, which she believes discourages providers and advisers from entering the market.

Ship director general Rozario is urging the FSA to reconsider its view that advising on equity release is riskier than other mortgage products. She says: “The reality is that if an adviser is offering equity release to their clients, they are much more likely to get a visit from the FSA because they are still viewed as high risk. The FSA’s argument seems to be the people who are most likely to use equity release – those between 55 and 80 – are vulnerable. That is an insult and the regulator needs to reconsider its stance.”

Rozario also disputes the claim made by some advisers that equity release should only be considered as a “last resort” for clients.

She says: “To label equity release as a last resort is irresponsible and inaccurate. The whole debate around equity release needs to be reframed, because at the moment it is plagued with unfair, negative connotations. Advisers have a moral obligation to take equity release into account when giving advice. A person’s property needs to be viewed as part and parcel of their assets when planning for retirement.”

Andrew Dilnot’s care reform recommendations, which propose introducing a £35,000 cap on the long-term care costs borne by individuals, could provide a welcome boon for equity release. But Rozario admits she was disappointed it did not lend its support to equity-release products. The report simply acknowledges that equity release “may be attractive for some people”.

Rozario says: “We welcome the Dilnot report’s key recommendations but we were disappointed he did not go further and support equity release as a legitimate solution to paying for care. I think the Government are scared of the potential negative headlines if it did come out and support people using the value in their homes to pay for their retirement.”

An FSA spokesman says: “Advisers should be basing recommendations for equity release on the suitability for a customer, taking full account of their individual circumstances. As long as advisers are compliant with the FSA handbook, then they have nothing to worry about.”

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Readers' comments (6)

  • Andrea is 100% correct! The people who say it should only be consided as a last resort must think that we are going to live forever and poss be able to take out wealth with us!. What planet are they on? So there you are with your last few years on the planet faced with spend a bit of money and have a good time or wait and watch as either your kids inherit it or the state uses it to pay for your care! I dont live in the UK anymore..and when i see such narrow minded points of view like this...I am glad I dont!. And yes i was an equity release adviser

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  • One of the best products ever to have been made available.
    So many lives have significantly changed for those in later life ( for the better).
    From my experience the only people to object are the children who see their inheritance being reduced.
    The fact that there is an upper limit for the amount that can be borrowed does mean that there should be a decent enough amount left over for beneficiaries when the oldies peg out.

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  • I find it astounding that Rozario thinks advising on equity release is not higher risk than standard mortgages.

    Just consider the skills required to ensure you understand the clients true feelings about giving up part of their property and trying to ensure that they understand the risks that you are explaining to them.

    Then there is the sales process and the need to take into account the impact of benefits now or in the future.

    Equity release to normal mortgages is the equivalent of Pension Transfers to ordinary personal pensions. It requires extra exam qualifications and a lot more work with the outcome being it won't be suited to a lot of people.

    Whilst some consumers will be savy enough to fully appreciate the issues there will be plenty of potential customers who won't be.

    Get this wrong and fixing it is not going to be easy. The FSA are absolutely right to treat this as higher risk.

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  • “Advisers should be basing recommendations for equity release on the suitability for a customer, taking full account of their individual circumstances. As long as advisers are compliant with the FSA handbook, then they have nothing to worry about.”
    Well not until we use retrospective regulation somewhere down the line!

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  • Absolutely correct here Andrea. Equity release is a wholly appropriate product that has aided many of my clients either in or approaching retirement. The more advisers realise its true potential and benefits, the better for us all.

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  • Well said compliance man, I've seen equity release abused in the past and if the FSA relaxed their grip who is to say it won't be in the future.

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