Assessing vulnerability: How can firms help mitigate risks of DIY SIPPs?
There was cause for optimism for providers and intermediaries according to Equity
There was cause for optimism for providers and intermediaries according to Equity Release Council statistics in the third quarter of 2022. An increase of over 8% in equity release plans compared to the previous quarter – over 13,000 in total – is a promising uplift in post-pandemic business levels.
However, the warnings of increased demand for credit during this cost-of-living crisis as stated in the FCA’s Portfolio Letter to Lifetime Mortgage Providers continue to be a stark reality for many consumers. Add to this, the pressure of increased interest rates and decreased product flexibility, the lower financial resilience and heightened vulnerability of many financial service customers is an ever-growing concern.
The Portfolio Letter gave focus to future supervisory work for firms, including the fair treatment of customers in a post-pandemic world, along with the important role of the Consumer Duty regulations in 2023. In such challenging times, the value of robust systems and governance to identify and mitigate the risks of customer harm, the provision of fair pricing and the financial resilience of firms to meet threshold conditions cannot be under-estimated.
The emphasis on such points follows the FCA’s June 2020 review of advice standards in the lifetime mortgage market, and October 2020 Portfolio Letter to mortgage intermediaries – which highlights the risks of consumer harm in second charge and lifetime mortgage advice.
With 2023 now upon us, the onus of complying with the new Consumer Duty regulations is only likely to escalate and evolve. And so, it will be up to firms to demonstrate in practical terms their compliance with all of the Duty’s four outcomes as explored in our recent insight.
Boards are required to have robust measures in place to monitor standards and drive the right culture, which is likely to be a similar scenario in the equity release sector – by firms evidencing measures to address the consumer risks that are concerning the regulator. This could involve requests for information, focused monitoring on MI or customer outcomes, or a thematic review.
The FCA could come knocking at your door at any time – and in our data-driven world, they’ll be keen to see in demonstrable terms how your firm is responding to consumer risk.
Recently, the FCA’s Chief Operating Officer and Executive Director of Authorisations, Emily Shepperd, stated “Consumer Duty challenges you to ask significant questions about your purpose”. But as firms take practical steps to ensure they can demonstrate good outcomes across all their business processes and the customer journeys, limitations owing to data management systems may become clear. That’s where independent, expert advice can prove invaluable along with the integration of AI and RegTech to facilitate a data-led, evidential approach.
Preparation is the path to success. To find out more about how TCC’s subject matter experts can help your firm, book a call with us at a time that suits you here.