The FSA has issued a warning to advisers on the suitability of advice being given to consumers on equity release schemes.
A bout of mystery shopping exercises revealed 70 per cent of advisers did not gather relevant advice about customers’ suitability for the product.
More than 60 per cent of mystery shoppers reported their adviser had not explained the downside of equity release.
The regulator is particularly concerned about the advice given on “follow-on investments”, where advisers appeared to fail to explain the link between this type of borrowing and subsequent investments.
It conducted 42 mystery shops on product providers, IFAs and mortgage advisers to assess the advice standards within the lifetime mortgage market.
A second piece of work, involving visits to firms and desk-based research, looked closely at subsequent investment advice provided to customers of seven firms that are active in this market.
FSA managing director of retail markets Clive Briault says: “Our work has found another disappointing instance of many advisers giving poor quality advice.
It is extremely important that advisers ensure that anyone considering releasing equity from their property understands what is involved and can make a decision that suits their circumstances.
We will be carrying out further work in this area and we expect senior management to ensure that their advisers are giving appropriate advice, and to deal with any concerns that we identify. It is our aim to help retail consumers to achieve a fair deal, and the financial advice market should provide good quality, suitable advice to consumers.”