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Two-thirds Of Advisers Fail Equity Release Test

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Two-thirds of advisers fail equity release test

Pensioners turning to equity release are being let down by financial advisers, with two-thirds not up to scratch, according to a new report.

A mystery shopping investigation by consumer group Which? found that two thirds of financial advisers failed to pass all its benchmarks for good advice.

Just a third of the 40 advisers checked on met all the tests and only five out of 12 equity release specialists passed the benchmarks. This compared to eight of the 28 general financial advisers.

The importance of choosing the right equity release plan is vital as differences in plans and interest rates can cost homeowners tens of thousands of pounds.

Of those tested, 23 failed to carry out the fact-find they are meant to do on a customer before giving recommendations and seven did not even ask what the applicant's income was: vital for working out how much they need to boost it.

Two tests were used, one recent retirees in their 60s with reasonable disposable income wanting to pay for a major home improvement, and the other an individual in their 70s on a small income needing to carry out essential repairs and boost income.

Some advisers didn't say how quickly debt grows or discuss compound interest, which boosts debt when none of it is paid off.

Which? said: 'One IFA said there was no chance of using up all the equity in the 'customer's' home 'unless you live to 150'.'

Martyn Hocking, of Which? added: 'If you've been hit by plunging pensions, it might be tempting to release some much-needed money using your home. However, opting for an equity release plan is a big decision and it's not one that should be taken lightly.'

The equity release industry has defended itself against Which?'s attack, but admitted that there needs to be serious improvements in advice given.

Andrea Rozario, director general of Ship, the professional body for equity release product providers, said: 'We believe that when you look at this piece of research, you need to look at what has been excluded as well as what has been included. Which? has criticised the process for advice, but not the actual fundamental outcome of that advice, nor the products themselves. This is a step forward from last year when they branded equity release a 'product of last resort'.

'But continuous improvement is needed. Although there are estimated to be over 7,000 people who have taken the specialist equity release exams, the fact that Which? has found issues with the processes of some of the 40 advisers reviewed shows there is absolutely no room for complacency. Advice is a crucial step in the equity release process - and with each client's needs being highly individual and unique - one that should be closely monitored to ensure consumers are getting the best help possible.

'We know that the specialist advisers are acutely conscious of the need for high standards, and that many more generalist advisers are looking more and more closely at equity release, and completing the specialist qualifications. We believe that many of the shortfalls that Which? have found could be due to the process of explaining the product rather than to significant gaps in advisers' knowledge.'

Hmm. All you children of pension age parents might want to keep an eye on what they get up to.

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now for you pensioners out there, equity release means nothing of the sort.

It means borrowing money.

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Hmm. All you children of pension age parents might want to keep an eye on what they get up to.

You shouldn't count on inheritance money at all.

Edited by HostPaul TAFKA Rover2000

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