The FCA’s planned overhaul of adviser equity release qualifications will not solve the market’s main problem of ad hoc advice, an equity release specialist has said.
Bower Retirement Services chief corporate officer Andrea Rozario (pictured) said a new stand-alone equity release qualification may help to attract more advisers into the market but it will not automatically mean they do more business.
Rozario and equity release referral firm Key Partnerships warned in August that one of the main risks in the market was ad hoc advice. The risk stems from the lack of effective sourcing systems for advisers, coupled with the complex nature of the products, they said.
The Financial Conduct Authority (FCA) proposed to overhaul adviser equity release qualifications in September to encourage more advisers to enter the market. It had identified unlocking the value of a home as a potential remedy for affordability issues in retirement.
The regulator proposed either introducing a stand-alone qualification, or docking the current top-up qualification onto pensions or investments instead of mortgages. It said it feared many advisers were turning their backs on the booming market because it was tied to mortgages, which otherwise did not interest them.
Rozario said: “I think [the standalone qualification] will encourage advisers to get into the market, which they recognise is growing. This is a good thing – competition is always good for the consumer – but there also is a need for a deep understanding of both the products and the customers needs.
“Soft skills like patience and empathy are paramount. For those advisers who only do very limited business there is always a risk they are not fully up to speed on all the latest regulation and product changes. To make oneself knowledgable for one or two cases every now and then is not cost-effective and is therefore a risk.
“I’m not sure the new exam would eradicate this problem as those advisers are clearly still qualified but don’t do much business.”
She suggested: “Growing the market via lenders’ distribution and customer understanding is the way forward but keeping high standards and appropriate safeguards is essential.”
In principle, Rosario said, the FCA was right to consider a new stand-alone qualification to entice advisers outside the mortgage world. A pension or investment top-up, on the other hand, would “still be a barrier” to mortgage advisers, she argued.
Rosario added: “The requirement for mortgage qualifications to be obtained before the equity release exam has always been a sticking point because the advice process is vastly different to that of normal mainstream mortgages. It is not simply a case of finding the best interest rate – a number of factors need to be considered, not least entitlement to state benefits, other viable options, family involvement and so on.
“Often the process is more akin to that of a financial adviser as opposed to a mortgage broker. While the products are essentially mortgages, there are myriad features that are often more important than the rate alone.
“For many financial advisers who do not want to deal in mainstream mortgages, the requirement to have the qualifications is an obstacle to practising in the equity release arena. For this reason, a standalone qualification makes sense.”