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Keep it on the record

Equity release Ed Murray warns that advisers should keep thorough documentation to avoid landing in hot water at a later date.

The mortgage market is incredible. Where else is it possible to earn money by indebting someone up to the ocksters with a repayment schedule that stretches to the horizon and be thanked for it? What is more, once these debts have eventually been cleared, clients in their thousands return to their brokers to remortgage the property for cash. Whatever happened to once bitten, twice shy?

Owning our homes and being able to use them as cash-generating assets in later life is now an ingrained part of the modern British psyche. But in being so keen to rush headlong into debt and become property owners, many are blind to the potential pitfalls of poor product or advice and whether their folly is that of ignorance or inadvertence, the landing can be devastatingly hard.

People borrowing the second time round in the equity-release market are no less open to possible problems and indeed many believe more so. Whether this is because borrowers are older and more vulnerable or because the market is not as mature and competition is only now gathering pace remains to be seen. However, there are potential problems lurking and not just for borrowers but also for brokers.

The FSA’s report earlier this year makes depressing reading for anyone looking to borrow in the equity-release market. Managing director of retail markets Clive Briault said: “Our work has found another disappointing instance of consumers being given poor-quality advice. 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.” Those operating in this market can expect new rounds of mystery shopping in the new year.

In failing to gather sufficient advice about their clients, advisers may be missing opportunities for them to get help from state benefits and tax breaks and unless advisers are on top of their game, finding out exactly what is on offer will be beyond many.

For advisers unwilling to spend time researching such avenues or unprepared to refer their clients to other organisations such as specialised charities that can highlight what else might be available, then the door is being left wide open to future complaints and sanctions. In terms of treating customers fairly, any failure to investigate such options will not sit easy with the regulator and why should it? Brokers advocating poorly performing or overly risk-driven invest-ments may also be doing a similar disservice to their clients and face similar investigation from the FSA.

But it is not just poor advice which may land clients with poor products and brokers in trouble at a future date. Those failing to keep adequate records are inviting unpleasant repercussions from clients or their relatives when the property is sold and the loan is called in. In recent weeks, these pages have played host to much debate concerning the plight of Ivan Massow, who is facing a raft of complaints over alleged endowment and FSAVC misselling complaints. Massow’s case against the allegations could rely on the strength of documentation he has made in relation to what advice was given and why.

For those operating in the equity-release market, which has seen such growth, the threat of disgruntled inheritance beneficiaries looms large and document-ation will doubtless be called to account.

A growing number of family members will question the advice given to their elderly parents. Those who cannot demonstrate through documentation that their advice was sound may find themselves in hot water even where it was represen-tative of best practice,

Where brokers fail to match the needs of their clients and the offerings of the equity-release market and set up investment vehicles inappropriately, they will not only provide financial hardship for their customers but land themselves up to the eyes in trouble. However, those giving good advice but failing to record it properly will only have themselves to blame if they are unable to defend future complaints – and they will come.

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