A new report from Which? has revealed that two thirds of equity release advisers fail to pass all the benchmarks for what constitutes 'good advice', but at least the consumer watchdog no longer deems it the 'product of last resort', says trade body SHIP.
In its undercover investigation into the equity release advice market, mystery shoppers visited 40 advisors and found that only a third met all the benchmarks for good advice, with a total of five equity release specialists and eight out of 28 independent financial advisors passing the Which? test.
Some of the areas where advisors fell down included failing to conduct a thorough 'fact find', whereby the advisor gathers important information from the customer with which to determine which equity release plan, if any, is most suitable for their particular circumstances.
In order to pass the Which? test, advisors also had to talk through the different equity release schemes available, discuss alternatives to equity release such as downsizing, fully explain the fees and potential risks of equity release, and make a suitable recommendation, explaining to the customer why it meets their needs.
Martyn Hocking, editor at Which? magazine, says: "If you've been hit by plunging pensions, it might be tempting to release some much-needed money using your home. However, opting for an equity release plan is a big decision and it's not one that should be taken lightly."
To avoid making a life-changing decision based on the words of one advisor, Mr Hocking recommends that customers seek advice from several sources.
Responding to the report, Andrea Rozario, director general of SHIP (Safe Home Income Plans), which represents about 90 per cent of the industry, said that while Which? criticises the advice process, it does not dismiss the fundamental outcome as a 'product of last resort', as it has in the past.
The fact that Which? does not criticise the products themselves is "a step forward from last year," she said.
She also recognises that as a "crucial step" in the equity release process "improvement is needed" in the provision of adequate advice.
"We take additional steps to ensure that all consumers who use SHIP products have extra protection by insisting that they get independent legal advice as part of the purchase process. This does not diminish the importance of the advisers' role but adds another consumer safeguard."
Simon Little, director of equity release specialists Home & Capital, welcomes "any initiative that improves the service and offering to consumers in the equity release market."
Of the report, he added: "Which? have laid out some simple processes that all advisers operating in the equity release market should seek to adopt."
© Fair Investment Company Ltd
Thinking about equity release? Read our free online guide to equity release, and get equity release quotes and advice from experts Home & Capital to see if it's right for you.
