How referring clients for expert equity release advice could help to mitigate compliance risk
Mortgage brokers are often the first point of contact for homeowners seeking advice on their financial needs. As trusted advisers, it is their responsibility to ensure that clients receive the most suitable solutions tailored to their individual circumstances. In an increasingly complex financial landscape, mortgage brokers must consider a broad range of options for their clients, including equity release. However, because of the specialised nature of equity release products and the long-term financial implications they carry, mortgage brokers who don’t hold the required qualifications, or who are not confident in this area should consider referring their clients to whole of market equity release specialists like Equity Release Partners.
Referring clients to an equity release specialist is not only a good practice, but it also aligns with the principles of consumer duty—a regulatory framework set out by the Financial Conduct Authority (FCA) to ensure that financial services firms act in the best interest of consumers. For mortgage brokers, this means recognising when equity release might be a suitable solution for a client and ensuring they are advised by a specialist who can provide detailed, personalised advice.
Here’s why mortgage brokers should consider referring clients for equity release advice as part of their consumer duty:
1. Ensuring the Best Interests of the Client
The FCA’s consumer duty guidelines state that financial service providers, including mortgage brokers, must act in the best interests of their clients. This duty involves delivering appropriate advice, which includes recommending products or services that are in line with the client’s financial goals and personal circumstances.
Equity release, while beneficial for many, is a complex financial product with long-term consequences. These products, such as lifetime mortgages or home reversion plans, can significantly impact a homeowner’s finances, inheritance, and future wellbeing. As a result, recommending equity release should be done with caution, and mortgage brokers may not always be equipped with the specialist knowledge required to fully explain all aspects.
By referring clients to Equity Release Partners, brokers can ensure that the client receives expert independent whole of market advice. An expert equity release adviser will have the in-depth knowledge and qualifications to assess whether equity release is truly suitable for the client’s needs, taking into account their financial situation, future plans, and long-term goals. This referral helps protect the client’s interests, as it allows them to make a fully informed decision.
2. Complexity of Equity Release Products
Equity release products are not one-size-fits-all. They come with various features which can vary significantly across providers and ranges. In addition, clients need to be aware of the impact on inheritance, compounding interest, and the potential costs to their estate. These complexities require a deep understanding of equity release products which are evolving on a regular basis.
Mortgage brokers who typically specialise in recommending mortgages and other forms of secured lending, might be knowledgeable about the basics of equity release, but they may not be equipped to provide comprehensive guidance on the nuances of these products. For instance, do mortgage advisers currently recommend or carry out a means tested benefits check for clients on limited income? There is so much more added value that an equity release advisers provides other than just an equity release recommendation, this being just one.
Referring clients allows them to receive tailored advice that considers all of these complex factors. Our expert advisers are well-versed in the intricacies of equity release products and can guide clients through the decision-making process, ensuring they fully understand the advantages and disadvantages of the various options available.
3. Risk Mitigation for the Broker and Client
Mortgage brokers have a FCA responsibility and ethical obligation to ensure that the products they recommend are suitable for their clients. Recommending equity release without fully understanding its implications could expose both the broker and the client to risk. If the product is not suitable, it could lead to financial implications for the client or complaints regarding the broker’s advice.
Referring clients to a specialist adviser reduces the risk for both parties. Our expert advisers are required to conduct thorough assessments of the client’s financial situation, explaining all relevant risks and ensuring the client understands how equity release will impact theirs and their beneficiaries financial future. This reduces the likelihood of complaints, regulatory scrutiny, or any issues regarding the suitability of the product.
For the broker, it also offers peace of mind that they are not making a recommendation outside of their expertise and are instead relying on a qualified professional to ensure that equity release is the right choice for their client.
4. Regulatory Compliance
Since equity release has long-term financial consequences, brokers need to be especially cautious to avoid any potential conflict with the treating customers fairly principles. By referring clients to equity release specialists, brokers can help meet the regulatory expectation that consumers are fully informed and protected.
5. Focus on Client’s Overall Financial Strategy
Mortgage brokers should always take a holistic approach when offering advice to their clients. Rather than simply recommending a mortgage or other forms of secured loans, they should consider the client’s broader financial situation, goals, and long-term plans.
For clients who are nearing retirement or who may have significant equity tied up in their property, equity release could be an important part of their financial strategy. However, it’s not always the first or best option. An equity release expert will assess whether the client’s needs are better served by other products or strategies, such as downsizing, remortgaging, or alternative forms of finance.
Referring clients to an equity release specialist like Equity Release Partners allows brokers to take a step back and ensure that equity release is only recommended when it aligns with the client’s overall financial goals. An equity release specialist can look at the broader picture, integrating other financial considerations such as pensions, savings, and long-term care needs.
6. Building Trust and Long-Term Client Relationships
Mortgage brokers who demonstrate a commitment to putting the client’s best interests first by referring them to specialists will build trust and long-term relationships with their clients. When clients see that a broker is willing to involve experts when needed, they will feel confident that their financial wellbeing is the broker’s top priority.
Moreover, referring clients to Equity Release Partners can also lead to future business opportunities. A satisfied client who receives valuable and effective advice is more likely to return to the same broker for other financial services and also recommend them to their friends and loved ones. Building a network of trusted specialists, including those in equity release, can strengthen the broker’s business and reputation.
For more information about referring your clients for expert equity release, click here or call 0800 088 5950.
