In addition to answering the FSA’s questions on the sector, SERA has called for two other changes to reinforce consumer protection:
1) Firms to hold joint permissions for home reversions & lifetime mortgages in order to practice equity release. It is entirely inappropriate that a firm can recommend a lifetime mortgage to the exclusion of a home reversion plan which may often be more suitable.
2) Telephone sales of equity release should be banned. Face to face advice is the only way of adequately checking that the consumer possesses sufficient mental capacity to understand the risks. This is particularly so in joint cases, where one party invariably speaks for the other. A further danger of telephone sales is the risk of one party being made to act under duress. Many elderly homeowners have not had a valuation for many years, so it is also strongly felt that the adviser needs to visit the subject property to appreciate the likelihood of acceptance by the provider’s valuer, which in turn limits the risk of the consumer losing a non-refundable valuation fee.
Commenting on the response form, SERA Chairman Simon Chalk said: “We concur with FSA’s proposals in the main but remain concerned that equity release continues to be seen as a ‘mortgage sale’ and hasn’t been recognised as a wholly different proposition, sharing more common features with financial planning products.
“Less than two pages of the one hundred and eighteen page Discussion Paper DP09/3 are devoted to equity release. As the leading national body representing equity release advisers, we urge the FSA to engage with us in order to improve standards of advice, ensuring better consumer protection.”