Advisers are being asked to challenge customers with regard to their preferences, particularly around any misconceptions they may have about which equity release product is the most suitable for their needs and circumstances.
Bridgewater are also concerned that non-specialist advisers are moving too quickly to accept a client’s initial product preference instead of gathering the relevant information to make their recommendation.
It says there is a feeling that some advisers are telling clients what they want to hear rather than what they need to and that this could leave the client with an unsuitable product, particularly in the current climate.
The warning comes as the FSA’s Lesley Titcomb stated last month that the regulator is keeping a close eye on equity release advisers, particularly those who have recently diversified into the sector. There is concern that some firms may not have sufficiently robust equity release advice and sales processes, and could therefore be offering unsuitable advice.
Peter Welch, head of sales and distribution at Bridgewater Equity Release, says: “It is clear from the FSA’s recent warning with regard to equity release advice that firms need to look at their advice processes and the way they handle customers in this sector.
“As a sector still defined as ‘high risk’, the likelihood is that the FSA will always take a keen interest in those who are advising in this area, particularly at a time when many firms are making their first forays into equity release.
“Customers who come to an equity release adviser will often have their own preconceived notion of which product is right for them, regardless of their risk profile, their current needs and circumstances and the result they want to achieve. The very best equity release advisers will show ‘tough love’ and are not uncomfortable questioning customers about difficult subjects while challenging their views in order to make sure the advice received is ultimately aligned to the customer’s needs.
“Customers are much more likely to respect an adviser’s bold recommendation when it is clearly the one best suited to managing their risks and giving the highest probability of meeting their needs and aspirations, even if it may not be the advice the customer ‘emotionally’ wants to hear.
“A key focus for Bridgewater throughout 2009 will be providing further education and information to those advisers who may be looking to enter the equity release sector for the first time or are intent on shoring up their firm’s practices in this area.
“It is clear that those firms who do not take their responsibilities seriously will be doing their clients a major disservice and are therefore likely to find themselves firmly in the regulatory spotlight.”