In Conclusion

In setting out these views, the FCA is placing full responsibility with the advice firm. The lender is making the product available and setting a procuration fee offering. It is entirely the advice firms’ choice as to whether they offer that product, provider or take that level of compensation. The advice firm is accountable for their fair value assessment and the suitability of the product set against the consumer’s long term circumstances, not just their immediate objectives. The advice firm should know what marketing has delivered their leads.

Remember, a £20,000 holiday on a 7% lifetime product rate taken at age 55 will be a £160,000 deduction to the estate at age 85.  Taking borrowing now, which narrows options later in life that may become a necessity, could deliver real regret on all sides. With conventional products usually priced off SONIA rates and lifetime from Gilts, that disparity makes advice ever more complex. Going lifetime too early in life’s journey might also deliver regret.

Determining whether to take full drawdown for an amount now at a defined interest rate, or waiting until later on a flexi product which might attract a different interest rate, lies with the adviser, but the consumer must fully understand the implications of the choice.

Interestingly we are seeing the FCA moving out of siloes within in its own policy work – it recently announced that in June it will launch a discussion on the future of the mortgage market, which includes lending into later life. This signals a change its previously segmented approach.

The FCA has this market fully in its sight over the next two years, so firms would be well advised to proceed with caution.