Who Regulates Equity Release Advisory Firms?
When considering an equity release scheme, many people can be a little overwhelmed by the availability of products and the rules which need to be followed by financial advisors or brokers. While it may be a little confusing, equity release advisors are obliged to abide by the code of conduct established by the Equity Release Council and are strictly regulated. This is to ensure that consumers are fully protected and aware of the options available to them. Consulting with an advisor can ensure that you are made aware of the products and services that are best suited to your circumstances and the limitations or restrictions associated with your chosen scheme.
Who Does the Regulating?
All equity release products are regulated by the FCA (Financial Conduct Authority). While all equity release advisors have agreed to abide by the guidelines and code of conduct established by the Equity Release Council, the FCA monitors the transactions and takes action if there is a failure to comply with these standards.
How are the Companies Regulated?
Financial advisors and brokers are regulated in a number of different ways depending on how the firm was established. Some companies are authorised directly by having a compliance department in-house which ensures that all marketing materials and administration complies with the FCA guidelines. These companies report twice a year to the FCA to provide assurance of the trading of the company and ensures their financial stability.
Other companies may be established as part of a network. This network accepts responsibility to the FCA. This form of regulation allows the network to create a shield between the FCA and the equity release company. In this scenario, it is the network that ensures each brokerage complies with the FCA guidelines rather than the individual companies having a direct involvement with the FCA.
How Does this Affect Charges and Fees?
The different type of regulation will affect the individual company’s costs. Companies which are utilising the services of a network will be liable for the fees associated with this. These can be expensive and since the fees charged to clients are not controlled by the Equity Release Council, these costs are passed on in their advisor fees. Companies which are directly authorised by the FCA are usually larger and have established an internal department which organises the compliance and ensures that the rules and regulations of the FCA are properly interpreted. Since their only compliance costs are incurred from dealing directly with the FCA, this presumably results in lower fees and charges for their clients.
How Does the Different Regulation Affect Customers?
In theory, it shouldn’t. However, you may find that the charges and fees for advice from a network regulated company are higher. Additionally, networks have been under increasing amounts of pressure post Retail Distribution Review as the earning of commission on investment backed products has been outlawed. This has created a great deal of financial pressure as networks have lost a viable income stream on products such as pensions.
Who is the Equity Release Council?
This is a trade body which was set up specifically for the equity release industry. They have established a code of conduct which lists mandatory points that all equity release providers and advisors must comply with. This ensures that consumers are protected and have all the information needed to make an informed decision before agreeing to any scheme. This level of protection ensures that the equity release industry has some of the strictest rules and regulations within the entire financial services field.
If you have a complaint about the advice you have received from your equity release advisor, the Equity Release Council has a set complaints procedure. This ensures that all clients are treated fairly and that they secure the equity release scheme which is best suited to their circumstances.