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Mis-sold Equity Release. Equity Release Can Be Mis-sold By Accident.


Mis-sold equity release products could be just as dangerous as scams for a population already in the thick of economic hardship.

Helen Ball, group managing director at Tenet, said there has been a lot of talk this year over the Woodford fund scandal, but she reckons more industry shocks could be lurking around the corner.

“Times of financial difficulty can be a breeding ground for scams and get-rich-quick schemes, but seemingly benign and well-trodden products could also become equally dangerous,” said Ball.

“There’s also the growing popularity of equity release among cost-of-living pressures. This can be a valid solution in the right circumstances, but the regulator has concerns.

“We’re talking about a niche product with niche features so it’s ripe for being mis-sold, whether deliberately or accidentally.”

These solutions might look good on paper, but short-term decisions taken in moments of vulnerability can quickly go wrong”.

This year, the Financial Conduct Authority said it could be looking into adviser practices across the equity release sector once again, after finding examples of poor quality advice.

Some advisers have welcomed the probe, saying it will “probably get rid of some bad apples”.

The equity release industry has had to work to improve its reputation, which took a knock in the 1980s and 1990s amid a number of scandals, leaving people with large amounts of debt.

“An ill-timed equity release can’t be undone, and there can be severe consequences to quick fixes like cancelling insurance provisions, opting out of workplace pensions, or chasing riches in funds intended for the long term,” said Ball.

“These solutions might look good on paper, but short-term decisions taken in moments of vulnerability can quickly go wrong.”

In June, the FCA laid out its concerns for consumers hit hardest by the living cost crisis who may be more susceptible to buying “unsuitable” equity release products.

Later this year, one adviser told FT Adviser her client released £6,000 equity from their home to pay energy bills.

Other clients of hers had used the product to fend off repossession.

More brokers have since followed suit sharing similar experiences, showing a shift from equity release being used for luxury home improvements.

For these reasons, it “remains crucial” for advisers to stay close to their clients, providing them with not just advice but also emotional support and peace of mind as they navigate the winter period.

Pension drawdown under ‘new pressures’

The Tenet boss also noted that pension drawdown is “quickly rising” up on the agenda. 

In October, the FCA said it was "increasingly turning" its focus to retirement income strategies following its work on defined benefit pension transfers in recent years.

The City watchdog’s is in the "evidence gathering stage” due to concerns over the size of the retirement income market and those consumers with less wealth or drawing down large sums for the first time.

“Investment approach is key to successful drawdown, but what works in accumulation is not necessarily best for decumulation,” said Ball.

“There’s been many new pressures to consider, so a plan which may have been sustainable assuming 3 per cent inflation may no longer have sufficient headroom or be fit to withstand unplanned income shocks. 

“It’s vital that advisers keep a close eye on how these themes play out in the year ahead to continue offering the very best outcomes for clients.”  

With the regulator’s consumer duty also round the corner set to come into force from July 2023 Ball reckons more action could be taken against firms because there will no longer be a need to prove “actual harm”.

“The biggest difference will actually be for the regulator, which will be able to act more quickly and robustly against business practices that fall short, rather than needing to establish actual harm,” she said.

“The FCA has talked about becoming a more agile regulator, and the consumer duty is key to this.”

If you think you or a loved one has been the victim of being mis-sold equity release, contact Claimline Legal UK now for a FREE no obligation review of your case.

Claimline Legal UK - 0800 779 7457





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