Review of later-life mortgages finds poor advice and misleading promotions

The Financial Conduct Authority (FCA) has published a press statement to inform that it has reviewed the practices of banks and other entities as regards later-life mortgages (loans provided to home owners aged 55 or older). The results of this review – along with the FCA’s expectations in this context – can be found here.
Generally speaking, the FCA was highly dissatisfied with the findings. As the Authority notes, it found many cases where the advice provided to customers and/or the financial promotions did not meet expected standards. Specifically, as far as customer advice is concerned the FCA found that
– in some instances, advisers did not provide personalized advice taking into consideration the (financial) circumstances of the customer such as the borrower’s income and expenditures;
– often, advisers failed to discuss alternative options to a life time mortgage;
– on several occasions, advisers did not challenge customer assumptions or support their advice with sufficient evidence; and
– too often, firms incentivized (pure) sales at the expense of quality advice.
As far as financial promotions are concerned, the FCA found that
– many promotions were inaccurate or misleading;
– some promotions emphasized product benefits without adequately addressing associated risks; and
– some firms used their FCA regulated status in promotional materials.
As a result of the review, around 400 financial promotions were either removed or amended due to identified issues. Furthermore, many of the affected firms have since modified their sales practices and also changed the way they incentivize their advisors. As decisions about later-life mortgages are of utmost significance to elderly clients, the FCA urges all lifetime mortgage advisors and providers to closely study the review’s findings and take immediate corrective action, if so needed. In this context, the FCA also reminds of the new Consumer Duty and the obligation of firms thereunder.