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Ship shapes equity list

Mortgage Express lifetime product development manager Roger Hillier on how Ship is radically improving equity release standards

The risks of selling equity release are well documented and Ship has played a vital role in radically improving standards to ensure that the product design and selling imperfections of the past will not be repeated.

The FSA is also making a significant contribution to building a safer market environment and regulation of equity release has brought with it a package of measures. This includes an MCOB chapter dedicated to the selling requirements for a lifetime mortgage, labelling the sector as higher risk, monitoring selling standards with mystery shopping exercises and the requirement for advisers entering the market to have passed the appropriate lifetime mortgage exam.

Education about equity release and all it entails for adviser and customer alike is the driving force behind the latest industry developments aimed to raise standards of advice and competency. On June 19, Ship introduced two new initiatives in its drive to improve the market and reduce opportunities for misselling – the introduction of its equity release checklist and the requirement for all advisers to have passed a lifetime mortgage exam.

There is genuine concern among advisers that they can make what they consider to be an appropriate product recommendation which many years later results in a misselling complaint. So what help is there for advisers to ensure that they make a competent product recommendation? This is where Ship’s equity- release checklist – a 10-point adviser guide to equity release – comes in.

It is designed to provide intermediaries with direction when they are advising customers on equity release (lifetime mortgage and reversion plans). It covers just 10 of the most signifi-cant points to be considered in the sales process and when assessing the customer’s suitability for equity release.

The checklist is by no means a substitute for a full fact-find or for providing full advice but it is an excellent way to remind intermediaries of the areas they should cover.

The checklist gives a clear set of 10 guidelines covering eligibility for DSS benefits, the customer’s tax position, the need for the customer to talk to their family before making a decision, details of the customer’s health and life expectancy, a recommendation not to invest equity-release funds in medium and long term investments and so on.

The checklist is freely available and to get a copy, all the adviser needs to do is download it from the Ship website at

For each equity-release sale, the adviser should complete the form referring to the customer, sign it, perhaps give the customer a copy and then keep it in their file for future reference as part of an audit trail.

Advisers must still cover all the points explained in MCOB chapter eight – the full requirements are explained in the CML’s good practice notes (available from the CML’s website) but the Ship equity release checklist is a useful aide-memoir.

The second Ship measure concerns the lifetime mortgage qualification. To help raise selling standards and market knowledge among advisers, Ship will require all advisers selling Ship members’ products to have passed a lifetime mortgage exam.

From August 1, 2007, Ship members will no longer accept business from advisers who do not hold a suitable lifetime mortgage qualification. This means that in just over 12 months’ time, all advisers will have to have studied for, sat and passed a lifetime mortgage exam or module.

Three of the aims of this new requirement are: p To introduce consistency in exam requirements across the equity release industry by removing an anomaly in the current examination requirements for mortgage advisers. This is in turn will give product providers a degree of comfort that all advisers have reached the same qualification standard.

p To help all advisers demonstrate to customers a minimum level of knowledge and competency – that they are professionals who have passed an industry qualification.

p For the industry to demonstrate that all advisers have achieved the same minimum level of education and competency for equity release.

Currently, any new adviser joining the industry since October 31, 2004 wanting to sell a lifetime mortgage must pass the standard mortgage exams plus a lifetime mortgage certificate, module or exam unit. Advisers who qualified to sell mortgages before October 31, 2004 have no FSA requirement to pass a lifetime mortgage certificate or exam module – they can take advantage of a system known as grandfathering, where they are transferred across into the new qualification framework without the need to pass a dedicated lifetime mortgage exam.

There are no firm statis- tics on how many advisers have been grandfathered but the situation has clearly proved to be unacceptable in light of Ship’s aim to ensure a consistent level of knowledge and competency across the industry.

Advisers have the choice of three routes to gain their lifetime mortgage competency. These are via the Institute of Financial Services, the Chartered Insurance Institute and finally the Scottish equivalent.

For the examination bodies – the IFS and the CII – the Ship requirement is for every adviser to have sat and passed the following as a minimum to continue selling Ship members’ equity-release products. (See table).

When reversion plans become regulated in 2007, the expectation is the FSA will require advisers to pass an examination covering them although its shape and form has not been finalised. Once the requirements are known, I am sure Ship will review and revise their examination requirement as appropriate.

Ship has been very fair and generous in giving those who need to pass a lifetime mortgage exam plenty of time to do so – they have until August 1, 2007. Last year, head of distribution Tim Sturley and I both passed the IFS lifetime exam. For any adviser with several years’ experience of equity release, this multiple-choice exam should not be difficult to pass. Speaking to many advisers in the equity-release market, specialists and non-specialists, the good news is that they wholeheartedly support the exam initiative.

It is vital for the health of the equity-release ind-ustry that providers and advisers demonstrate that selling standards are continually reviewed and are as high as possible. These two Ship initiatives will certainly help.


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