Poor advice and misleading promotions found by FCA in later life mortgage review

The regulator said financial promotions can significantly influence consumers’ understanding of the market.

The Financial Conduct Authority has worked with later life mortgage firms to improve their advice processes (Joe Giddens/PA) (PA Archive)

The City regulator has worked with later life mortgage firms to improve their advice processes and prompted the removal or amendment of nearly 400 misleading promotions.

The Financial Conduct Authority (FCA) said its review had found many inaccurate or misleading promotions, product benefits being highlighted without any balancing description of the risks, and firms using their FCA regulated status “in a promotional manner”.

Financial promotions can significantly influence consumers’ understanding of the later life lending market, and of the options they have available, the regulator said.

A later life mortgage is a type of equity release for homeowners who want to release money tied up in their homes to help meet their needs.

These complex products are often sold to customers with a higher risk of being in vulnerable circumstances so it is essential they are fully informed and receive suitable advice, the FCA said.

The FCA’s review looked at firms responsible for around half of all lifetime mortgage sales.

It found “in many cases” advice did not meet the standards expected. For example, the regulator said it had found a lack of evidence that sufficient consideration of consumers’ individual circumstances had been given and advice lacked discussion of alternatives.

The FCA has required those firms which fell short to improve the quality of their advice.

It is driving improvements to ensure advice is personalised and shows consideration of customers’ circumstances.

Sheldon Mills, executive director of consumers and competition at the FCA, said: “Releasing money tied up in your home later in life is a big decision and can have a financial impact on consumers and their families well into the future.

“Our review led to the largest later life mortgage firms making improvements to their sales and advice practices, and almost 400 promotions have been removed or amended where firms have identified issues with them. We expect all firms to assure themselves they comply with existing rules and guidance and higher standards under the consumer duty.”

The wide-ranging consumer duty was introduced over the summer to make sure financial firms put customers at the heart of what they do.

The majority of firms in scope of the later life mortgage review changed how their advisers are incentivised, the FCA said.

It added that anyone who believes they were poorly advised can complain to the firm and, if they are dissatisfied with their response, to the Financial Ombudsman Service.

Other lifetime mortgage advisers must pay close attention to the review’s findings and act immediately where they need to, the regulator added.

We share the regulator's commitment to putting customers first

Jim Boyd, Equity Release Council

Jim Boyd, chief executive of the Equity Release Council, said: “We support the FCA’s engagement with the lifetime mortgage sector, which helps tens of thousands of customers each year to enjoy better standards of living.

“We share the regulator’s commitment to putting customers first and ensuring they are fully informed and advised about their options. Its findings will inform our ongoing standards-setting work to help raise and reinforce best practice consistently across the sector.

“Modern equity release helps people to enjoy financial freedom and a better quality of life. Carefully considering the option of releasing equity, alongside all alternatives, should be part of every homeowner’s retirement planning.

“The council and our members are undertaking significant work to reinforce advice standards and ensure clear customer communications. We wholeheartedly support the new consumer duty and will continue to work with the regulator, members and wider industry to take every opportunity to improve customer experiences.”