30th November 2020
Research conducted by the financial advisory service, Age Partnership, has discovered that significant numbers of people within the UK continue to lack a clear understanding of the features involved with equity release products, with 66% of over 55’s saying that they do not know what a no-negative equity guarantee is and 70% saying that they do not understand the difference between tied versus whole-of-market advice. The survey, which was based on a sample of 1,014 respondents, has also revealed a worrying lack of awareness regarding the impact of interest rates on equity loans, with 54% of respondents saying that they do not understand the implications of this crucial factor and 15% saying that taking out an ER plan would mean that they no longer owned their house- a glaring example of the need for better education amongst clients and of the vital role that advisors must continue to play in dispelling the falsehoods and assumptions highlighted by the report. Indeed, it is vital that customers continue to receive a steady flow of information and expertise that enhances the reputation of our sector and broadens popular appeal accordingly. Because ultimately, quality of advice underpins all that we strive to do and achieve as an industry.
Yet, as economic conditions continue to deteriorate across the UK and demand for alternative finance options begins to intensify, the need to ensure that working practices are maintained to a high order and that customers are protected from the risk of financial harm is as important as ever. In practice, this means working hard as an industry to isolate and root-out practices which fall short of the standards needed to safeguard client interests, with the FCA’s recent report into the ER sector highlighting some woeful (albeit isolated) examples of advisers pursuing a form-filling or box-ticking approach to cases in order to assess personal criteria or of rubberstamping customer preferences without challenge or supporting evidence, regardless of suitability; practices that are entirely at odds with where we need to be. Instead, advisers should look to prioritise a holistic, all-embracing approach to transactions that considers each case according to the individual needs and circumstances of customers, while also investigating the suitability of alternate lending options, even if these do not necessarily accord with the wishes of clients in the short-term. Moreover, they should also ensure that recommendations are supported by sufficient backing evidence and that key features (such as the impact of compound interest levels or restructuring of legal ownership on loans and properties) are explained in a manner which is clear and understandable. This is something that I am sure we can all agree on.
Nevertheless, while maintaining standards of service and advice are of obvious significance to our industry, the means by which customers receive this advice in the first instance should be regarded as of equal importance, particularly given the long-term nature of ER contracts. So, while the ability to advise customers via video conference or other remote channels has been crucial in terms of maintaining market activity over the lockdown period, we should be wary of assuming that technology is suitable or capable of replacing the role of one-to-one meetings between clients and advisers in the long-term, especially considering the scope for mistakes or oversights that a wholly remote approach can afford. Indeed, the ability to make eye-contact or to observe body language at first-hand is indispensable when trying to assess whether a customer is vulnerable or has the mental capacity to understand what they are being told, while the information that can be gleaned from a face-to-face legal meeting is often vital when trying to discern hidden circumstances or the suitability of products.
Yet many of these subtle nuances are lost altogether when meetings are conducted via video-link (let alone via telephone or email) and this runs the risk of leaving clients at the mercy of a process that can lack a necessary attention to detail. Moreover, as the number of people losing jobs in the UK continues to grow and the pressure to provide for children or other dependents begins to intensify on elderly property owners, the probability of cases involving fraud, duress or coercion are likely to rise accordingly and this raises the need for financial and legal advisers to guard ever more carefully against such occurrences. Yet, in cases where meetings are conducted via remote platforms (such as Zoom or Facetime, for example) it can be virtually impossible to ascertain who is in a room at any given point or to judge whether the client is being unduly influenced by a third party, thereby raising the possibility of an upturn in complaints, claims and reputational damage (let alone the unwelcome attentions of the media).
So, paying closer attention to the things that are NOT being said by clients is every bit as vital as the things that are and this approach simply cannot be accommodated by a single-minded reliance on digital advice platforms. In fact, it smacks of exactly the kind of perfunctory, box-ticking approach that we need to challenge and eradicate if we wish to protect the best interests of clients going forward, irrespective of whether the advice is being offered at the legal end of a transaction or at an earlier stage. Moreover, in a market environment which, as the Age Concern research has found, is defined by low consumer product knowledge, any focus that emphasises the role of technology at the expense of more traditional means of contact is likely to represent a step too far for many clients and increase the likelihood of expensive mistakes. Because, regardless of its merits, technology is no substitute for face-to-face financial or legal advice and least of all under our current economic conditions.
