When it comes to record-keeping and ensuring every single part of the advice is as well-documented as it possibly can be, I can think of no other advisers like those involved in the later life space, who are as au fait with the requirements and what is expected of them.
That is essentially by necessity, not least because there are so many moving parts to the later life, particularly equity release, advice process, that from a protecting one’s back perspective, you have to be all over your record-keeping in order to prove your case should you ever receive a complaint about your advice.
Equity release, of course, is somewhat unique in that regard, because complaints tend not to come from the client themselves; in fact they are overwhelmingly likely to come from a family member of a client or someone who is a beneficiary of their estate.
Recent analysis of the FOS complaint figures for 2022 reveals this. While there were 229 complaints published by the Ombudsman last year which mentioned ‘equity release’, only 50 actually referred to our sector, because of the layman understanding of what is an equity release product and what is releasing equity from a property.
However, the good news is that, of those 50 which were truly about equity release is only six were upheld. The less positive news is that we are seeing an increase in the rise in complaints made against advisers and nearly two-thirds of those are coming from those family members/beneficiaries.
And, even though the vast majority are not upheld, the need to ensure advisers are fully protecting themselves against these complaints has never been so acute. Especially when you consider that the claims management companies are likely to be increasingly sniffing round our sector, and when we look at what might be the ‘pinch point’ for such complaints.
I’ve spoken recently about what areas we may see more complaints being made from, and in my view, it is likely to be around the roll-up of interest in the future, and the suggestion that advisers did not provide clients with the option to pay off some or all of the interest when they took out the equity release product.
Now, again, those reading this are likely to be well-versed in putting their client advice and recommendation together, but it’s absolutely imperative that if – having completed your factfind – you can see the client is able to afford some or all of the interest payments, that you advise them to take up this option.
And, if they don’t want to do this, then again it’s all about documenting this conversation, documenting the response, outlining very clearly why you put this option to the client given their needs and circumstances, and documenting the reasons why they chose not to go ahead with this.
And, while the majority of complaints are coming from family/beneficiaries – and if the client is happy to have them involved in the process – then you also want to document your conversations with them, pointing out they might wish to make the interest payments themselves in order to protect future value/inheritance, etc, and again recording fully if they did not want to do this.
Currently, about 75% of lifetime mortgages are on a fully rolled-up basis, and there’s no doubting there are a large number of clients who are either not in a position to pay some/all of the interest, or simply don’t want to. However, the process by which you have got to this point, needs to be absolutely watertight, particularly if – as I say – it’s obvious from the factfind that they could make interest payments on this product you are recommending, or their family member could.
We have a tool on Air which will show you how much making an interest payment can save the client in terms of the rolling-up of the debt, and this can obviously be a clear way to show them and the family what difference financially this could make over the long term.
It’s also another weapon in your armoury of showing exactly what you delivered to the client, the options you gave them, the response you illicited, and the lengths you went to in order to outline what the future could look like, if they went for this option as opposed to if they do not.
Overall, a slight rise in complaints is nothing to be feared, especially when so few are upheld, but it’s just something to be aware of – especially in light of Consumer Duty which is giving a much tighter framework for advisers to excel within, but at the same time is also providing a similar structure for potential complaints if you have not done what you should have. As always, a belt and braces approach is the right one to adopt.
Stuart Wilson is chairman at Air Club