LaterLiving equity release planner Simon Chalk has branded the FSA’s latest MMR proposals “totally inappropriate” for not banning non-advised equity release sales.
In last week’s paper, the FSA stated that currently advisers must check, broadly, whether the product meets the needs of the customer in non-advised sales. The regulator said “there may be scope to strengthen this test” for non-advised sales, but it has not yet said how it would do this.
But Chalk, who is also the chairman of the Society of Equity Release Advisers, says all equity release sales should be on an advised basis because of the nature of the products.
He says: “We believe that all sales should be conducted on a fully advised basis with non-advised sales being totally inappropriate. Equity release involves – for the majority of people – the greatest asset they will ever own, being utilised at a most critical point in their life. Therefore expert advice is essential.”
The paper also notes that the equity release sector has two distinct sectors – lifetime mortgages and home reversion plans. The regulator says it “would expect equity release advisers to disclose the scope of the service they offer in each market sector”.
Chalk says this is “inadequate” and insists the FSA should make advisers offer both lifetime mortgages and home reversion products and says the FSA has failed to tighten up the advice process.
He says: “This is wholly inadequate. FSA should insist that intermediaries advise on both types of equity release plans and consider the affordability of alternative traditional capital raising methods such as an interest-only or repayment mortgage.
“Those who offer just one type of equity release product are not true specialists and may short change consumers in pushing their limited proposition, particularly where the adviser only has regulatory permissions to offer lifetime mortgages. In many cases homeowners would be better served with a home reversion plan than a lifetime mortgage, yet comparatively few are recommended, due in part to the failure of FSA to tighten up the advice process.”