Financial advisers fail equity release advice tests

Thursday, 23 July 2009 08:20

Two-thirds of financial advisers fail to give good advice on equity release, according to an undercover investigation.

Which? sent mystery shoppers to 40 advisers - including Key Retirement Solutions, Just Retirement, Aviva, Prudential and Age Partnership along with 28 independent financial advisers (IFAs).

It found five out of 12 equity release specialists passed its tests and eight of the 28 IFAs.

Which? hit out at advisers not conducting 'fact-finds', with seven not asking about the researcher's income, as well as problems over fees.

The risks of how fast debt can increase were not properly flagged in a number of cases, with one IFA saying there was no chance of using up all the equity in the customer's' home 'unless you live to 150'.

Martyn Hocking, editor of Which? Magazine, said: "If you've been hit by plunging pensions, it might be tempting to release some much-needed money using your home.

"However, opting for an equity release plan is a big decision and it's not one that should be taken lightly."

He added anyone considering equity release should visit two or three suitably qualified independent advisers to be sure you're making the best decision based on the options available.

Andrea Rozario, director general of industry body SHIP, said "Continuous improvement is needed" but equity release had improved since it was described as a 'product of last resort' by Which? a year ago.

"Although there are estimated to be over 7,000 people who have taken the specialist equity release exams, the fact that Which? has found issues with the processes of some of the 40 advisers reviewed shows there is absolutely no room for complacency," she said.

"Advice is a crucial step in the equity release process - and with each client's needs being highly individual and unique - one that should be closely monitored to ensure consumers are getting the best help possible."

She added many of the problems would have stemmed from explaining the product rather than to significant gaps in advisers' knowledge.

Claire Barker, chairman of the Equity Release Solicitors' Alliance, said: "Homeowners should not be deterred from taking out equity release as a result of these findings, but specialist financial advice and independent legal advice are paramount.

"Seeking independent specialist legal advice also forms a larger part of the equity release process and creates an added safety net which can support the advice given by the IFA, arming consumers with full knowledge of the legal obligations before signing up to a scheme."

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