First, it is wise to consider what we can call ourselves under the new regime. By this I mean the definitions of the terms ‘independent’ and ‘whole of market’.
The Financial Services Authority is maintaining the split in the market that enables advisers to offer advice in either home reversions or lifetime mortgages or both sectors.
The FSA says in 8.3.2 R: “In applying initial disclosure requirements to equity release transactions, the market for equity release transactions should be treated as one single market with two separate sectors. References to the ‘whole market’ must be read as references to the whole market for equity release transactions.
“This is unless the firm only gives personalised information or advice to customers on products in one market sector, in which case references to the ‘whole market’ must be read as references to the whole market for lifetime mortgages or home reversion plans as the case may be.”
This means there is a need to carefully determine which titles firms can use. Naturally, the national press and consumer groups will be using titles to direct consumers to advisers who are independent for equity release rather than those who have elected to advise in one sector or the other.
As in the residential mortgage market, the FSA says in 8.3.2A G that the effect of the rules on independence is that a firm that sells lifetime mortgages and home reversion plans from the whole market and enables customers to pay fees for the provision of the service can hold itself to be independent for the equity release market (see MCOB 4.3.7R).
But if a firm offers a service on this basis for only one of the market sectors it can only describe itself as independent for that sector.
This guidance will be important in the coming months as along with it come requirements concerning financial promotions. Companies that limit their advice will be required to make clear to consumers what their propositions are.