2023 marked a significant milestone in the UK’s financial services sector, especially concerning equity release advice. According to Kelly Melville-Kelly, the director of risk, policy, and compliance at the Equity Release Council (ERC), the industry witnessed “significant progress” last year in both product development and advice standards.
The Impact of Consumer Duty
One of the primary factors contributing to this progress was the implementation of consumer duty in the summer. This initiative emphasised consumer protection, rights, and ethical conduct, aligning closely with the ERC’s mission. Melville-Kelly praised the proactive engagement observed within the industry, particularly noting a high turnout at the ERC’s webinar on fair value.
FCA’s Review on Equity Release Advice
The Financial Conduct Authority (FCA) conducted a thorough review of equity release advice, uncovering areas where improvements were needed. The review focused on firms responsible for half of all lifetime mortgage sales, identifying issues such as insufficient discussion of alternatives and lack of consideration for clients’ individual circumstances. Melville-Kelly described these findings as a wake-up call for the industry, emphasising the “collective responsibility” to apply the learnings across the board.
Responding to Challenges
Despite the hurdles of soaring inflation, cautious financial markets, and rising interest rates, Melville-Kelly commended the industry’s response. She noted that financial advisers were often advising against equity release when it wasn’t suitable, showcasing a commitment to ethical practices and consumer well-being.
The Road Ahead
Melville-Kelly believes that the industry is now set up for recovery and long-term sustainability. She asserts that the majority of customers are satisfied with equity release services, but the goal is to ensure every potential customer is fully informed and well-advised. The FCA’s review and the introduction of consumer duty have been pivotal in guiding the industry towards this objective.