Our sector continues to dissect September’s FCA review focused on the ‘Action needed to ensure good outcomes for later life mortgage borrowers’, and quite right it does too.
As you will no doubt know, the FCA outlined seven specific expectations it wants lifetime mortgage advisers to be achieving each and every day in terms of their work in this sector, and at our recent ‘Breakfast with Stuart’ meeting we went through these in some detail. And will continue to do so in future webinars, events, and the like.
Two expectations focus clearly on the specific process of advice with a client, particularly in terms of information gathering in order to meet their needs and circumstances and to ensure ‘recommendations are suitable’, and also ensuring there are specific conversations and a balanced assessment of the potential alternatives that might be available to clients.
Of course, you only get to that point with a thorough review of the client’s finances and what they are hoping/wanting to achieve, so a detailed income/expenditure review within the fact-find both now and in the future. That point is important, to consider the potential for future income and circumstance changes that might ultimately impact on the client, and the recommendation that advisers come to.
Not forgetting, as mentioned, the ability to challenge the assumptions of a client in this area. Some may be seeing a later life adviser because they are convinced they need a lifetime mortgage, but advisers should encourage clients to consider their options.
There is a danger, particularly if there has been a less than thorough assessment made, that the adviser becomes a simple order-taker, merely responding to what the client thinks they need, rather than going through the process methodically and coming to the recommendation of what the client actually needs.
And it’s for these very reasons and more, that we’ve recently launched our Later Life Lending Navigator tool because what we want advisers to be able to do is navigate a changing advice process, including assessing what the future might bring for the client, and to have access to an evidenced-based tech solution that ends up at the most suitable lending option for them.
The tool splits into two parts in order to achieve this, with Navigator firstly being able to filter out later life lending options depending on the client’s ability (and want) to service the debt – paying all or partial interest for example – along with a range of questions which will ascertain what priorities the client has.
The second part allows the adviser to drill down into the specific cost of borrowing calculations for each potential option, which in turn further narrows the options available before coming up with the right lending solution, at which point the adviser can source and recommend the most appropriate product.
It also, rather importantly, delivers a full audit trail for the adviser and client to see how this process was worked through, the information that was taken into account, and the results this then generated.
We believe this offers a simple and intuitive tool for advisers to utilise, and while the underlying build is incredibly complex, the Navigator is easy to use and designed to take the adviser and the client on the advice journey, ultimately coming to the right option for both.
What you might not know about the work behind the Tool, is that it truly was a collaborative, industry, effort. It was built in conjunction with five different later life lenders who all contributed, plus we secured feedback and insight from eight different networks on their view of the questions versus their existing advice process.
That, in my mind, is testament to the ambition of all stakeholders in this area, and demonstrates a real desire to ensure that we are producing positive outcomes for consumers, in an area which is often purported to be delivering something else.
It is also, again very importantly, a Consumer Duty-focused solution in this area and is well suited for this new environment, supporting with the generation of more positive outcomes and ensuring that it’s open not just to later life advisers, but other mortgage advisers who might wish to broaden their product offering and review what is available for older clients.
Now, we freely admit, this might not be right for every adviser. Indeed, we don’t think it is. However, if you as an adviser are interested, we will engage with you, provide all the right support and guidance to ensure you understand how it works, and how to get the most out of it. But there’s certainly no three-line whip for firms to use this.
However, if you do, I’m sure you (and your clients) will feel the full benefits of it, not just in a regulatory and compliance sense in terms of providing the necessary audit trail but also in terms of presenting your clients with more options and finding a solution that suits their needs/goals, not just for now but also into the future.
Stuart Wilson is Chairman at Air Club