The retirement market is divided on the need for a standalone equity release qualification amid fears consumers will be left behind as low adviser numbers fail to meet booming demand for lifetime mortgages.
Earlier this month the FCA dropped plans to bring in a new qualification. The standalone achievement would have replaced the current system, where advisers must be mortgage-qualified up to level three to sell equity release.
The regulator said it made the decision following “mixed feedback” from the market.
The FCA originally consulted on the issue because it thought some advisers were not selling equity release because they did not want to get mortgage qualifications too.
But many retirement experts say the market is crying out for a standalone qualification. They argue current adviser numbers are not enough to deal with rapid market growth. The volume of lifetime mortgage plans grew by 22 per cent in 2016 to hit 27,534, according to the Equity Release Council.
Old Mutual Wealth head of retirement policy Jon Greer says: “The FCA’s decision to drop plans to create a standalone equity release qualification is against the general direction of travel for retirement planning.
“This simplification to the qualifications would have helped advisers meet the growing demand for a holistic approach to financial planning that includes equity release, whose popularity is growing at a serious pace.”
An Old Mutual Wealth survey found 68 per cent of people approaching retirement thought their home should play a role in financial planning.
Greer says: “Advice is crucial. However, today retirement guidance services have limitations on how much help they can give on housing wealth. This thinking needs to shift and the regulator should be supporting that shift.”
A “disappointing” decision
Another critic of the FCA decision is Bower Retirement chief corporate officer Andrea Rozario.
She says: “It is disappointing, as creating a comprehensive standalone qualification would have been a great message for the market, highlighting that the FCA recognises equity release’s significant role in helping to finance retirement planning. Customers need advisers with the skills and capability to explain retirement planning options thoroughly and that should include equity release specialists.”
Rozario adds that equity release should not be lumped in with mortgages from an advice perspective.
She says: “Equity release is different to mainstream mortgage planning, requiring different skill sets and the styles of advice in equity release and the mortgage market are very different. Whilst general mortgage knowledge should be part of this exam there are a plethora of other requirements which could have been encompassed by a standalone exam.”
Retirement Advantage equity release head of marketing Alice Watson also thinks the FCA decision was a “missed opportunity”.
She says: “We know recent rule changes and long-term trends mean that most people will only be able to secure the retirement income they want by taking a more a holistic view of what their different pots of wealth, including their properties, can do for them.
“Meanwhile, we also know although the equity release market is reaching record highs, there is still a huge amount of potential wealth stored in property that people are not tapping into.
Creating a stand-alone qualification would have been a great message for the market, highlighting that the FCA recognises equity release’s significant role in helping to finance retirement
“The FCA may have decided against a standalone equity release qualification, but it is vital that it continues to work with the industry to improve the current qualification system. As more and more people turn to equity release as part of a holistic approach to retirement planning, a bigger cohort of advisers qualified to offer it to customers is essential.”
Joining the dots
But others say the market does not need a standalone qualification – including lifetime mortgage trade body the Equity Release Council.
Chairman Nigel Waterson says the FCA decision was a “clear win for consumers”.
He adds: “We welcome the FCA’s decision not to develop a standalone equity release qualification, which is a clear win for consumers. Different consumers have different needs, and advisers need a comprehensive knowledge of a range of potential solutions – including those available via the wider mortgage market – to provide well-rounded advice.
“Its decision to stick with the status quo on equity release qualifications does not prevent industry considering further progressive moves to join the dots between the equity release, residential mortgage, pensions and later life arenas.”
More 2 Life channel marketing director Stuart Wilson says the market needs to focus on advisers that are qualified but not practising to help meet demand.
He says: “We need to make sure these advisers are encouraged to either start advising on equity release again or refer their clients to specialists who can take the case forward.”
An evolving market
While the FCA has ruled that there is no need for a standalone equity release qualification yet, the regulator appears to have left the door open for future changes.
The wording of the regulator’s policy statement says it has decided “not to change the appropriate qualification for equity release at this time.
With equity release demand increasing, and no clear answer concerning how to raise adviser numbers to service this demand, perhaps the market could see a standalone qualification in the future.
Greer says he hopes consumers will not suffer in the meantime.
He says: “While they the regulator has left the door ajar to revisit the issue in the future, the situation could change rapidly where the number of people
seeking retirement advice that includes using equity release outstrips the number of advisers qualified to give it.”