JLM Mortgage Services belives the charging of percentage-based advice fees on equity release products is not in the ‘spirit of Treating Customers Fairly (TCF)’.
The mortgage and protection network says it has seen clients of other equity release firms having to pay between 2-4% in fees, based on the loan amount, which can cost many thousands of pounds depending on the size of the loan, plus the adviser will also pocket a procuration fee on top.
It believes there is no reason why equity release advisers should not be charging a fixed-price for advice – JLM’s equity release advice fee is currently £1295 – and argues that only on, what it terms, ‘ultra complex’ advice work should a percentage fee be charged.
JLM has voiced concern that potentially vulnerable customers might be unaware of the level of fees that are payable in such a situation, and wants to see further education of potential borrowers around the equity release fee options that are available.
Rory Joseph, director of JLM Mortgage Services, said: “The practise of charging an equity release client a percentage-based fee for advice certainly doesn’t seem to be within the spirit of TCF, and we would go so far as to say it is profiteering. Fees charged at a percentage of the loan are not suitable for equity release advice; indeed we would suggest they are only suitable for ultra-complex work, which quite frankly equity release is not.
“We recently had a client where their lifetime mortgage loan amount was in the hundreds of thousands of pounds, and still they only paid £995 for the advice. If they’d gone to an adviser that charged a percentage fee, they could have been looking at a fee of £10k-plus. That can’t be right – the fee should be commensurate with the work involved and no equity release adviser is carrying out £10k-plus of work.”
Sebastian Murphy, head of mortgage finance at JLM Mortgage Services, added: “Most advisers active in the equity release market charge a fee for advice, and given the nature of the product and the work involved, that is fully understandable. However, just because this is accepted practise, we as an industry should not be charging potentially extortionate fees based on a percentage of the loan. Somewhat ironically, this is not an issue with procuration fee levels – as most lenders active in equity release pay similar amounts – but adviser charging.
“We appreciate that different adviser firms run different models, but still there is absolutely no reason why any equity release customer – who could, let’s not forget, be quite elderly and vulnerable – should be paying thousands of pounds for their advice. It’s wrong and it’s not treating customers fairly – we need to educate the public that they are not beholden to these firms and that quality alternatives are readily available.”
