The Financial Conduct Authority has demanded improvements in the later life mortgage / equity release sector after finding evidence of poor advice and misleading promotions.

The watchdog has told some of the largest firms in the sector to raise their games after finding almost 400 misleading promotions.

An FCA audit of the sector - one of the first major reviews to be published following the new Consumer Duty requirements introduced in July - found that advice was often not of sufficient standard.

Following the review, the majority of firms assessed have changed how their advisers are incentivised but the FCA said that anyone who believes they were poorly advised can complain to the firm and, if they are dissatisfied, to the Financial Ombudsman Service. 

Later life mortgages are the most popular type of equity release product and are aimed at homeowners who want to release equity from their homes to help meet later life needs.

The regulator said these were often complex products routinely sold to customers with a higher risk of being in vulnerable circumstances. With this in mind, the FCA said it was essential that customers were “fully informed and receive suitable advice.” 

The review looked at firms responsible for around half of all lifetime mortgage sales and found that in many cases the advice given fell short. It found, for example, a lack of evidence that sufficient consideration of individual circumstances had been given and advice offered lacked discussion of alternatives.  

The FCA said it has required those firms which fell short to improve the quality of their advice.

The FCA added that it was, “driving significant improvements in processes to ensure advice is personalised and shows consideration of customers’ circumstances.”

Sheldon Mills, executive director of consumers and competition, said: “Our review led to the largest later life mortgage firms making improvements to their sales and advice practices, and almost 400 promotions have been removed or amended where firms have identified issues with them.

“We expect all firms to assure themselves they comply with existing rules and guidance and higher standards under the Consumer Duty.” 

Jim Boyd, CEO of the Equity Release Council, the trade body for many later life mortgage / equity release providers, said: “We support the FCA’s engagement with the lifetime mortgage sector, which helps tens of thousands of customers each year to enjoy better standards of living.

“We share the regulator’s commitment to putting customers first and ensuring they are fully informed and advised about their options. Its findings will inform our ongoing standards-setting work to help raise and reinforce best practice consistently across the sector.

“The Council and our members are undertaking significant work to reinforce advice standards and ensure clear customer communications. We wholeheartedly support the new Consumer Duty and will continue to work with the regulator, members and wider industry to take every opportunity to improve customer experiences.”