Brokers and equity release experts have shared their views on whether firms that solely advise on equity release, and do not consider alternatives such as retirement interest-only (RIO) and traditional mortgage products, offer the best outcomes for consumers.
The conclusion was categorically not, with one saying that the Financial Conduct Authority (FCA) allowing this was “madness,” and another branding firms that purely offer equity release “one-trick ponies.”
Gareth Davies, director at Southampton-based broker South Coast Mortgage Services, said: “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 £200,000 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.”
This was a sentiment further echoed by Simon Bridgland, director at Canterbury-based broker and equity release specialist Release Freedom.
He said: “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 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 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 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?”
