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Mystery shop reveals basic equity-release failings

Lifetime mortgage advisers have been accused by the regulator of treating the product as an opportunity to sell rather than as an opportunity to give advice.

The FSA is also urging firms not to rely on literature packs to explain products and focus on face-to-face interviews.

It says it is not a regulatory issue but questions whether clients are being treated fairly if they are not told verbally of the high-risk nature of equity release.

In detailed analysis from mystery-shopping in 2005 and 2006, which was released this week, one scenario introduced was designed to ensure advisers did not recommend a lifetime mortgage as the client wanted a lump sum of 4,000 for home repairs and 50 a month but was on a low income with little savings.

Only 17 of the 39 advisers from both samples asked if alternative methods had been considered to raise cash or whether entitlements to benefits had been assessed. The FSA says the problem was worse in the 2006 sample.

It says: “Improvements have been noted but the majority of firms assessed appear to be responding as a sales opportunity rather than an information or advice opportunity.”

Rozario Harris managing director Andrea Rozario says: “Those results are disappointing. It must be coming from those that do not deal with equity release on a regular basis as it is so basic.”

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