It is almost six months since the FCA published its findings from exploratory work on lifetime mortgage lending on 17 June 2020. In what has been a muddled year, where mentally it feels like it should be March yet we are nearing Christmas, it’s important that the significance of this regulatory review does not get lost as 2020 draws to an end and we enter 2021. This is particularly the case as the FCA has set out in its recent Dear CEO letter to mortgage intermediary firms that it intends to do further work on lifetime mortgages during 2021.
To refresh, the FCA’s main concerns centre around the equity release sales and advice process, in particular the insufficient personalisation of advice, insufficient challenging of customer assumptions and lack of evidence to support the suitability of advice. These communications combined form a clear message that firms need to take action; cannot be complacent and think that the issues raised do not concern them.
As an industry we should not make assumptions that the FCA review and recent Dear CEO letter only relate to firms dipping their toe into the later life market intermittently – to make that assumption puts us in a dangerous place. Indeed the 2020 supervisory work was on the dozen most active firms in this market. It is very unusual for the FCA to publish its findings from exploratory work meaning that its concerns are widespread and not just limited to firms that carry out a few equity release cases each year. The FCA has also been explicit in that all firms should ensure that their advice processes, including how they record the suitability of advice, are sufficient. If we believe that this only relates to dabblers in the market, then we are in denial.
It will take a concerted effort from all that represent the equity release market to ensure there is change and to convey the message on the reality of the situation. However, there has been a distinct lack of communication from some industry bodies on the actions required and updates on any progress. Back in June some were vocal in the mortgage trade press about what actions they had planned but have since remained quiet. There must be more open and transparent dialogue to re-ignite the discussion and ensure the correct level of focus.
The mortgage advice industry will be measured by the way it reacts and moves forward. Comments made in the FCA review and recent Dear CEO letter should not be viewed as criticisms but rather an opportunity. An opportunity to ensure regulated advisers take responsibility, not delegate to solicitor checks, and really mean it when we say we put consumers at the heart of everything we do. We cannot ignore the fact that there will be increased regulatory scrutiny over the next 12 months and the industry needs to avoid a situation where the FCA feels intervention and action is necessary. Now is our chance to improve the perception of this market. With a collective approach this is possible – just as long as we don’t bury our heads in the sand.
Chief Executive, AMI