Consumer Duty and fair value: where are you now?
The FCA has published the findings from its
As a result of this multi-firm initiative, the regulator found that almost 400 financial promotions required removal or amendment due to their misrepresentative content. Adverts were highlighted as failing to meet FCA standards for a number of reasons, including providing inaccurate information, highlighting product benefits without counterbalancing what the risks may be to customers, or using a firm’s ‘FCA regulated’ status in a promotional manner.
With later life mortgages being the most popular type of equity release product, these are often a favoured choice for consumers who want to release money tied up in the value of their home. Often, the customers being sold to are at a higher risk of having vulnerable characteristics – which places even greater emphasis on the need for clear customer advice surrounding potentially complex products. The regulator outlined this issue further in its 2022/23 Business Plan and, in turn, reiterated its intention to review its previous findings of poor-quality advice in the market.
This latest FCA’s review concluded there was a lack of consideration of borrowers’ income and expenditure in some instances, as well as notable absences to consider suitable alternative products for the customer. The review also established that some firms were prioritising sales at the expense of quality advice and steering customer outcomes in preference to later life mortgage products.
In turn, the majority of firms have since changed how their advisors are incentivised in order to drive through the improvements required.
All providers involved in the latest findings have subsequently made changes to their sales and advice processes – and the attention now turns to intermediaries not involved in the review. These businesses are being urged to think through how the findings may affect their own promotions and suitability of advice to ensure compliance with the FCA’s rules and principles, including the Consumer Duty.
When advising later life mortgage customers, firms need to consider a multitude of points to determine that their consumers are receiving good outcomes through suitable advice. As such, intermediaries need to make sure their communications are understandable, clear and fair, whilst giving borrowers the time to make effective decisions through open and balanced conversations – with full disclosure of what alternative product options are available to them.
Seeking external support can be a beneficial step for later life mortgage providers to enable an objective, independent review of advice processes, financial promotions and advice files. The FCA has been very clear in their expectations for firms, and it will not delay in intervening with firms who fall short of the required standard.
Discuss your next steps… get in touch for an exploratory conversation about how TCC’s team of compliance experts can help ensure you’re meeting the regulator’s latest later life mortgage standards.