The main problem with Equity Release is not that it's a bad financial product rather one which is complex. The problem is therefore magnified by advisors often not going into as much detail as they should with prospective clients. This is born out by a new mystery shopper survey done in by the Financial Services Authority (FSA).
The FSA's report found the following -
- Lifetime mortgage advisors were accused of treating Equity Release 'as an opportunity to sell rather than as an opportunity to give advice'
- It urges firms not to rely on literature packs (normally riddled with stock photos of happy faces) to explain products and instead focus on face-to-face interviews
- The FSA questions whether clients are being treated fairly if they are not verbally told of the high-risk nature of equity release
- Only 17 out of 39 advisors (asked in 2005 & 2006) asked their clients if alternative methods had been considered to raise cash before Equity Release, this included whether the clients were entitled to further State benefits
The FSA's report finished with this quote in the summary –
'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'
Summary
For those interested in Equity Release the worse thing you can do is talk to a provider or financial advisor without doing your own parallel research. One of the first things we suggest is to read this excellent report from the Actuarial Profession entitled 4 Key Equity Release Questions.
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