Last year saw “significant progress” in both product development and advice standards, according to Kelly Melville-Kelly, director of risk, policy, and compliance at the Equity Release Council.
Melville-Kelly told FT Adviser that, as a result of this progress, the industry will be set up for recovery and long-term sustainability.
The biggest contributor to this progress was the arrival of consumer duty in the summer.
The emphasis on consumer protection, rights, and ethical conduct was welcomed by Melville-Kelly as being “very much in keeping with the council’s mission”.
She recalled that the council had a “unique” seat at the table for consumer duty as a trade body which unites providers, financial advisers, legal professionals and others involved in the customer experience.
She described observing a record number of members join the ERC’s consumer duty webinar on fair value “one of the most satisfying experiences of 2023”.
“That kind of proactive engagement bodes well for the future,” she added.
Equity release advice review
Another thing which looked to boost advice standards was the FCA's crack down on equity release advice.
The FCA found many cases where advice did not meet the expected standards, with firms being told to improve the quality of their advice.
Looking at firms responsible for around half of all lifetime mortgage sales, the FCA found shortcomings included not enough discussion of alternatives and a lack of sufficient consideration of a client’s individual circumstances.
Melville-Kelly said the regulator's review involved some “challenging” conversations for the sector.
She stated the industry has a “collective responsibility” to apply the learnings from the review “across the board”.
She added that, while tens of thousands of customers take out new lifetime mortgages every year and “the majority speak highly of equity release”, the industry should keep working until every potential customer is fully informed and well advised about their options.
Melville-Kelly said the FCA's input provided a “timely measure” of how certain practices need to adapt for consumer duty.
“As the regulator highlighted, the firms it inspected have tackled the need for improvement head-on and their experiences will have helped to prompt others to do likewise,” she explained.
She added that she would be “very surprised” if any firm in retail financial services hasn’t adjusted its approach over the last 12 months as a result of consumer duty.
Inflation
Soaring inflation, cautious financial markets and an end to the era of low interest rates meant that 2023 was not the year anyone had hoped for.
But Melville-Kelly “genuinely thinks” the industry’s response to these challenging circumstances was “admirable”, with advisers routinely cautioning against equity release when the circumstances aren not right.
However, shy pointed out there has been “no sign” of the rush of customers some people predicted from the cost-of-living crisis.
tom.dunstan@ft.com
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