FCA mulls standalone equity release qualification

Carmen Reichman writes

The Financial Conduct Authority (FCA) has proposed creating a standalone qualification for advisers wishing to sell equity release products amid concerns about a lack of competition in the market.

In a consultation out on 14 September the regulator said the way equity release qualifications were currently linked to mortgages meant some advisers were turning their backs on the products.

This meant consumer access to equity release was limited, leading to competition in the market being inhibited.

The FCA said: “Our discussions with stakeholders have shown that some believe that the current structure of the equity release appropriate qualification may be a barrier to a wider number of consumers being able to access the product.

“In particular, some stakeholders suggested that some independent financial advisers may not be offering equity release because, before they can do so, they need to be appropriately qualified for a product (mortgages) that otherwise they have no interest in selling.”

The regulator said a potential solution to the problem was to either develop a fully standalone qualification for equity release or to link a top up version to existing pension or investment qualifications.

In any case advisers would need to study mortgages however, because the products are predominantly loan-based, the regulator said.

The equity release market has grown exponentially in recent years – earlier this year the Equity Release Council confirmed lending had hit an all-time annual high of £1.6bn in 2015.

The majority of equity is released through lifetime mortgages, with sale and lease back arrangements (home reversions) accounting for less than 1% of the market, the FCA said.

For many generalist advisers the cases they tackle are few and far in between. “It is very much an added value service to my existing customers and I don’t deal with it on a daily basis,” Rowley Turton Chartered financial planner Scott Gallacher said recently.

The FCA had already said last year it was considering to tweak the way it regulates equity release amid concerns the market was under-functioning. It was keen to address the problem of affordability in retirement and had identified unlocking the value of a home as a potential remedy, it said.

It now wants to “get a better sense” of the numbers of advisers without an appropriate mortgage qualification who would be interested in becoming qualified to sell equity release.

Provider more 2 life welcomed the proposals. Channel marketing director Stuart Wilson said: “We have both the supply and demand for equity release, but not the adviser numbers needed to support the tripling of the market size, which is what we expect to happen by 2020 with lifetime mortgages hitting the £5bn barrier.

“This market has evolved from being somewhat niche into a specialist advice market and we need to raise awareness about retirement lending if this industry wants the lifetime mortgages sector to grow.”

The FCA invites firms to submit comments before 13 December 2016.