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"It's madness that the FCA allows firms to solely offer equity release advice"

ended 22. November 2023

Brokers and equity release experts have shared their views on whether firms that solely advise on equity release, and don’t consider alternatives from the wider mortgage market, such as RIO (Retirement Interest Only) and traditional mortgage products, are offering the best outcomes for consumers. The conclusion is categorically not, with one saying the FCA allowing it is “madness” and another branding firms that purely offer equity release “one-trick ponies”.

According to Gareth Davies, director at Southampton-based broker, South Coast Mortgage Services: "Given that there's a higher risk of dealing with a vulnerable individual due to the demographic that seeks equity release advice, it's madness that the FCA allows firms to solely offer equity release 'advice' without taking into account the full complement of products available. For me, to offer true advice, you must be able to consider all areas of lending for an individual. In the past week alone, we've spoken to a client that had recently been 'advised' to take a £200k equity release product. Don't get me wrong, they could get it with ease, but after a call to us, it was obvious that it wouldn't be the most cost-effective or suitable solution for them, and would likely have cost them thousands of pounds more than necessary. How can that be right in this day and age of regulation?"

Charles Breen, director at Wellingborough-based Montgomery Financial, shared much the same view: “To a hammer, everything is a nail and the same applies to equity release advisers who only offer equity release. They are limited in what they can offer and, as a result, the solution to all issues is equity release. It's why it's so important everyone goes to a whole of market broker, to a firm that is able to offer standard mortgages along with lifetime. Often, we have found that when people are fully informed of all of their options, they are choosing RIOs or over-50s mortgages instead of true equity release, as it suits their needs and goals much better.”

It's a sentiment echoed by Simon Bridgland, director at Canterbury-based broker and equity release specialists, Release Freedom: “The issue is when the specialists are simply equity release specialists, single product sellers. If an adviser hasn't got traditional mortgages in their kit-bag then that adviser will simply sell the service they have. The rapid evolution of later-life products could mean they become more like traditional mortgages going forward, so a broker who doesn't offer the whole solution will find themselves being singled out and perhaps considered not to be acting with Consumer Duty in mind.”

Justin Moy, managing director at Chelmsford-based broker, EHF Mortgages, was left scratching his head: “How is anyone who is only allowed to advise on equity release going to be able to deliver that holistic approach? And does the commission and fee structure that is popular within this market drive the right behaviours when you only have a limited range of providers? We should be encouraging mortgage advisers to work across this wider market, not making it difficult and expensive to operate within, thus encouraging a handoff model that is lucrative for the specialist firms, to the potential detriment of the borrower.”

Gary Bush, director at Potters bar-based MortgageShop.com, went one further: “Being an equity release product-only adviser needs serious Financial Conduct Authority review. Such a blinkered view for such delicate circumstances isn't really impartial. Since being qualified for equity release over a decade ago, all it has taught me is that, generally, the mainstream mortgage market and its retirement borrowing arrangements generally offer a much better scenario for most applicants and their dependents. Equity release products are very much needed but so is truly impartial advice from across the board.”

Rowan Frayling, managing director at J Finance Ltd, agreed: "Holistic advice in the later life space is essential. With lenders like L&G announcing another hybrid product that will join equity release, conventional mortgages and Retirement Interest Only (RIO) products, it is essential that an adviser talking to someone in their 50s and onwards can consider all the options available."

Darryl Dhoffer, director at Bedord-based broker, The Mortgage Expert, was withering: "Equity release specialists at many of the larger equity release firms are effectively one-trick ponies. They may only be able to recommend equity release products, even if there are other products that would be more suitable. This is because they are not qualified to give advice on other types of mortgages. As a result, consumers who use equity release specialists may not be getting the best possible advice. They may end up with a product that is not suitable for their needs."

Scott Taylor-Barr, director at Leicester-based broker, Barnsdale Financial Management, believes he may have the solution: “One solution is to not have later-life mortgage specialists who are not fully qualified in all mortgages and look at standard and retirement interest-only (RIO) at the same time, but that's a huge level of upskilling with significant costs and will take time to achieve. Another solution would be to have lifetime mortgage specialists removed from direct access transactions with the public, meaning that they can only act where there's been an introduction from another mortgage professional who has already researched and discounted standard mortgages or RIOs for that individual. This latter approach would have less negative impact on practitioners and allows people to specialise whilst reducing the risk to customers.”

Matthew Taylor, director at Equilaw, added: “Consumer duty regulation and the move away from a super low interest rate environment have ensured that equity release brokers need not just an awareness of RIO and residential mortgages, but also need an advice solution. I think the key is to be able to strike a balance between having the requisite specialist knowledge to advise on an equity release plan, but also being able to offer a solution across a suite of lending products depending on the client's circumstances. Ultimately, the effectiveness of a mortgage broker, whether specialising in equity release or offering a broader range of mortgage products, lies in their ability to understand their clients' unique needs and provide well-informed, client-centric advice.”

Dan Osman, head of later life lending at UK Moneyman, concluded: “Dealing with the financial affairs of later-life clients is very much a specialist area where partial knowledge can lead to significant foreseeable harm. Looking at the number of Retirement Interest Only (RIO) mortgages and associated over-50s lending products taken out, I do have some genuine concerns that there could be people falling between the cracks. This could occur when a person engages with a high street mortgage broker who then refers to a specialist later life adviser as there could be scope that, whilst acting in good faith, neither deals in RIOs. On a more general note, can we really be surprised that so many clients who seek advice in a market which so often refers to itself as equity release end up with an equity release product?"

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14 responses from the Newspage community

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Simon Bridgland
Director at Charwin Private Clients
I can understand the need for specialist advisers in an area such as later life lending. The issue is when the specialists are simply equity release specialists, single product sellers. Often a client could be better served with a traditional mortgage whilst keeping the option of a specific later life product for a later date if necessary, but that's not to say a modern lifetime mortgage isn't very attractive and suitable for someone of working age who is financially comfortable. If an adviser hasn't got traditional mortgages in their kit-bag then that adviser will simply sell the service they have. The rapid evolution of later life products could mean they become more like traditional mortgages going forward, so a broker who doesn't offer the whole solution will find themselves being singled out and perhaps considered not to be acting with Consumer Duty in mind. Would their advice pass the 'mum test'?
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Gareth Davies
Director at South Coast Mortgage Services
Given that there's a higher risk of dealing with a vulnerable individual due to the demographic that seeks equity release advice, it's madness that the FCA allows firms to solely offer ER 'advice' without taking into account the full complement of products available. For me, to offer true advice, you must be able to consider all areas of lending for an individual. With mainstream lenders now relaxing lending into retirement criteria, RIO options, the new L&G Hybrid model, and equity release, there's a host of solutions that could accommodate a client's needs, all with various pros and cons. In the past week alone, we've spoken to a client that had recently been 'advised' to take a £200k ER product. Don't get me wrong, they could get it with ease, but after a call to us, it was obvious that it wouldn't be the most cost-effective or suitable solution for them, and would likely have cost them thousands of pounds more than necessary. How can that be right in this day and age of regulation?
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
The Financial Conduct Authority has recently commented to say this is a concern they continue to have with later life mortgage specialists: are all the potential options being fully considered before a recommendation for a lifetime mortgage, such as equity release, is made? One solution is to not have later-life mortgage specialists who are not fully qualified in all mortgages and look at standard and retirement interest-only (RIO) at the same time, but that's a huge level of upskilling with significant costs and will take time to achieve. Another solution would be to have lifetime mortgage specialists removed from direct access transactions with the public; meaning that they can only act where there's been an introduction from another mortgage professional who has already researched and discounted standard mortgages or RIOs for that individual. This latter approach would have less negative impact on practitioners and allows people to specialise whilst reducing the risk to customers.
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Charles Breen
Founder at C B
To a hammer, everything is a nail and the same applies to equity release advisers who only offer equity release. They are limited in what they can offer and, as a result, the solution to all issues is equity release. It's why it's so important everyone goes to a whole of market broker, to a firm that is able to offer standard mortgages along with lifetime. Often, we have found that when people are fully informed of all of their options, they are choosing RIOs or over-50s mortgages instead of true equity release, as it suits their needs and goals much better.
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Rowan Frayling
Managing Director at J Finance
Holistic advice in the later life space is essential. With lenders like L&G announcing another hybrid product that will join equity release, conventional mortgages and Retirement Interest Only (RIO) products, it is essential that an adviser talking to someone in their 50s and onwards can consider all the options available.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Like anything, the more specialist someone is, generally the more expertise they have in their field. However, you wouldn’t see an orthopaedic surgeon for a rash despite them both being doctors. Independent financial advisers that offer mortgage and equity release advice would be considered the gold standard and they can consider all aspects of a client's financial planning. If it’s certain that a lifetime mortgage is the right approach, a specialist in that area might be right. That is not to say that someone only offering equity release advice is an expert. Unless they are offering independent advice, they are still a salesperson.
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Bob Singh
Founder at Chess Mortgages
The equity release market has spawned as a result of mainstream lenders’ inability to adapt and offer solutions in-house, in particular, to end-of-term clients on interest-only mortgages. End -of-termers are often left with little choice except to consider ER solutions especially if they have insufficient income to justify a RIO mortgage. End -of-termers should have the same options as a product switch so that a new rate and extended terms are automatic. Many are forced into expensive and inappropriate ER products due to the lack of availability of solutions in the mainstream market. Mainstream lenders often lack the will or vision to design new products for different markets other than the mainstream vanilla cases. The high proc fees should not influence adviser choice or be the deciding factor when recommending ER solutions.
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Justin Moy
Managing Director at EHF Mortgages
With the development of more Retirement Mortgage options, such as RIO (Retirement Interest Only) and 'normal' mortgage lending available up to age 75 or even 80, it is so important that mortgage advisers who work with these older clients have the full mortgage market products to recommend from, not just equity release products. How is anyone who is only allowed to advise on equity release going to be able to deliver that holistic approach? And does the commission and fee structure that is popular within this market drive the right behaviours when you only have a limited range of providers? We should be encouraging mortgage advisers to work across this wider market, not making it difficult and expensive to operate within, thus encouraging a handoff model that is lucrative for the specialist firms, to the potential detriment of the borrower.
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Editor
Darryl Dhoffer
Founder at The Mortgage Geezer
Equity release providers that only concentrate on the ER product range may not offer the best outcomes for consumers. This is because they are not considering all of the options that are available, such as RIO (Retirement Interest Only) and more traditional mortgage products.
Mortgage brokers who are also qualified in ER can provide holistic advice across the full mortgage range. This means that they can consider all of the options available and recommend the product that is best suited to the individual consumer's needs. ER specialists at many of the larger equity release firms are effectively one-trick ponies. They may only be able to recommend equity release products, even if there are other products that would be more suitable. This is because they are not qualified to give advice on other types of mortgages. As a result, consumers who use equity release specialists may not be getting the best possible advice. They may end up with a product that is not suitable for their needs.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
Focusing solely on equity release products can limit the range of options available to consumers. Brokers qualified in both equity release and the broader mortgage market, including alternatives like Retirement Interest Only (RIO) and traditional products, can provide more holistic advice. Those who bring dual expertise to the table will ensure a comprehensive understanding of their client's financial situation, allowing for tailored recommendations beyond the confines of a single product category.
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James Bull
Mortgage Broker at JB Mortgages
I am taking increasing numbers of enquiries from later-life borrowers with as wide a range of circumstances as anyone else. Many of them do not require equity release, there are many lenders out there with no maximum age and a normal mortgage is much more suitable. The best approach for most clients is to speak to a normal mortgage broker in the first instance who can see the big picture with all the options, and if the mortgage broker identifies that equity release is the best option, then the mortgage broker can arrange this. Personally, I have an equity release specialist I work with and prefer to refer such cases on.
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Dan Osman
Head of Later Life Lending (Age 55+) at UK Moneyman
Dealing with the financial affairs of later-life clients is very much a specialist area where partial knowledge can lead to significant foreseeable harm. Looking at the number of Retirement Interest Only (RIO) mortgages and associated over 50s lending products taken out, I do have some genuine concerns that there could be clients falling between the cracks. This could occur when a client engages with a high street mortgage broker who then refers to a specialist later life adviser as there could be scope that, whilst acting in good faith, neither deals in RIOs. On a more general note, can we really be surprised that so many clients who seek advice in a market which so often refers to itself as Equity Release end up with an equity release product?
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Gary Bush
Financial Adviser at MortgageShop.com
Being an equity release product-only adviser needs serious Financial Conduct Authority review. Such a blinkered view for such delicate circumstances isn't really impartial. Since being qualified for equity release over a decade ago, all it has taught me is that, generally, the mainstream mortgage market and its retirement borrowing arrangements generally offer a much better scenario for most applicants and their dependents. Equity release products are very much needed but so is truly impartial advice from across the board.
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Matthew Taylor
Director at Equilaw
What we have seen over the past 12 months is a definitive shift towards brokers, directly or using their referrer network, providing a more holistic approach to advice in the later life lending sector. Consumer duty regulation and the move away from a super low interest rate environment have ensured that equity release brokers need not just an awareness of RIO and residential mortgages, but also need an advice solution. I think the key is to be able to strike a balance between having the requisite specialist knowledge to advise on an equity release plan, but also being able to offer a solution across a suite of lending products depending on the client's circumstances. Ultimately, the effectiveness of a mortgage broker, whether specialising in equity release or offering a broader range of mortgage products, lies in their ability to understand their clients' unique needs and provide well-informed, client-centric advice.