The Equity Release Council has urged advisers to take action ahead of the imminent consumer duty deadline.
The council reminded advisers of their responsibilities under the next phase of the Financial Conduct Authority’s consumer duty, which comes into force on July 31 2024.
It explained the “closed book” phase of the duty means consumers on products that are no longer sold or renewed must come under the same scrutiny as those on current products.
ERC director of risk, policy and compliance, Kelly Melville-Kelly, said that, while providers shoulder the most responsibility, advisers have a key role to play too.
“The consumer duty is about fairness, firms must act in the best interests of their customers and take reasonable care to avoid causing harm, at all times,” she said.
“Embracing this proactive approach during the open book phase has meant that organisations have had to update and change their processes, but our members have risen to the challenge.
“Applying the same scrutiny to closed book customers is going to be harder still.”
Additionally, Melville-Kelly pointed out that some firms will have inherited closed books which could present an “even greater challenge” as many of the originator firms are no longer in the market.
“For providers, termed manufacturers in the duty, this could mean unpicking legacy systems that have long since been archived,” she explained.
“For advisers, or distributors, it’s about working with the providers as well as checking client records to see if any are on closed book products and ensuring they are kept informed of their options.”
She added that firms also need to ensure that if a client’s circumstances have changed, there is an assessment of the ongoing suitability of the product, with particular attention paid to vulnerable customers.
Closed books
While equity release is subject to the duty, it could provide a “lifeline” to customers of other products - such as mortgage prisoners and interest-only customers without repayment vehicles - who could be identified under the duty.
“Equity release can also provide support for other closed book customers who may be languishing on interest-only products without a repayment vehicle, or who find that they are mortgage prisoners after their original provider left the market,” Melville-Kelly said.
“Even if the customer sits within a closed book, firms must check whether the product remains suitable and that the customer still understands the risk and benefits.
“If the answer is no, then firms must have a plan to support that customer.
“The end of July is also the deadline for firms to submit their annual review which must include an assessment of whether the firm is delivering good outcomes for its customers.”
tom.dunstan@ft.com
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