Innapropriate equity release and lack of Financial Advisor advice

pbd343

I have discovered that my mother did an Equity Release in 2004 which was not discussed with any of the family. Looking at the information provided by the Financial Advisor the amount borrowed was well above what mum required to cover a few small debts. What is even more worrying is that there is no other contact from the Financial Advisor and, to me. that is a breach of the FSA rules of putiing the protection of the customer first. The Financial Advisors are no longer trading.
The Financial Services Compensation Scheme only considers complaints from Oct 31st 2004 and this was done in July 2004. Is there anywhere to go with a complaint on this against the Financial Advisors fror professional mis-conduct?

MorningcoffeeIV

What exactly is the nature of your complaint?  If you weren't aware of the ER, then you won't be aware of how much contact your mother had with her advisor.

The FSA have not existing for many, many years. You're probably thinking of the FCA. 

MWT

pbd343 said:

I have discovered that my mother did an Equity Release in 2004 which was not discussed with any of the family.

There was, and is currently, no requirement to involve other members of the family in the decision process, so no complaint on those grounds.

pbd343 said:

Looking at the information provided by the Financial Advisor the amount borrowed was well above what mum required to cover a few small debts.

There was, and is currently, no requirement that the amount released be limited to what is required for current debts, so no complaint on those grounds.

pbd343 said:

What is even more worrying is that there is no other contact from the Financial Advisor and, to me. that is a breach of the FSA rules of putiing the protection of the customer first.

Leaving aside the FSA vs FCA point, there was, and is currently, no requirement for there to be any further contact from the advisor once it has been determined that the product is suitable for the customer, so no complaint on those grounds either...

For whatever reason, your mother obviously decided not to share with you before now that she decided to release, and presumably use, money from her property 19 years ago. That was her choice to make at that time, and while the best advice is generally to tell those who may have expectations of inheritance about this sort of thing, it remains an option not to do so...

That this has come as a potential unpleasant surprise to you does not constitute grounds for a complaint, so do please explain how you feel your mother has suffered as a result of receiving the cash 19 years ago, and in what way you are able to show that she was the victim of misconduct...?

 

dunstonh

I have discovered that my mother did an Equity Release in 2004 which was not discussed with any of the family. 

There is no requirement for it to be.  So, no issue there.

Looking at the information provided by the Financial Advisor the amount borrowed was well above what mum required to cover a few small debts.

Taking ER to cover a few small debts would be unusual.  Typically, it would be a larger amount especially as many lenders have a minimum and often people would prefer to not pay all the fees to get further amounts later on.   So, no issues there.

What is even more worrying is that there is no other contact from the Financial Advisor and, to me. that is a breach of the FSA rules of putiing the protection of the customer first. 

Please point out what rule you think has been breached as I am not aware of any such rule.  (clue: there isnt one)

The Financial Services Compensation Scheme only considers complaints from Oct 31st 2004 and this was done in July 2004. Is there anywhere to go with a complaint on this against the Financial Advisors fror professional mis-conduct?

No.  There is no one to claim against.  However, you haven't given one valid reason for the complaint anyway.  So, its not as if you are missing out.

If your mum didn't need the "extra" money borrowed, then it would be available for you to inherit.  If your mum spent it, then it means she got to enjoy her money.  So, you should be happy for her.

Keep_pedalling

Your mother needed / wanted the money and whatever reason she had for doing it it was her decision to make. She is an adult and did not need to consult family. She has suffered no financial loss and hopefully the money improved her quality of life. The fact that you will not be inheriting as much as you thought you would is no cause for complaint.

Whatever you do, do not make your mother feel any guilt at doing this.

mjm3346

She almost certainly will never need to sell her home off to repay the equity release.
With presumable no monthly repayments required affordability is/was not an issue.
There is no need for any ongoing contact from an advisor.
She probably should be getting annual statements that show how the loan is gathering pace as it gets bigger and bigger each year, on the plus side she is probably out of any period that might have a charge for early redemption.

pbd343

Thank you all for comments/observations etc. Couple of observations in response to the comments:
As a non financial person I may well have a different perspective to others. 
For those who seem to think the claim is because there is a loss of inheritance, that is not the case as I am financially secure and there is still plenty of inheritance. It is not about the money.
I am well aware that people who do this don't need to inform family and have no issue with that. Mum had her reasons and I respect that.
I have seen her file which contains paperwork relating to the Equity Release and a Financial Advisor has informed me that the initial assessment and report provided to mum was very poor and did not contain some of the information which should have been provided in the situation.
For those of you who have said that there is no need for contact after the product was sold/completed I have researched this and note on the FCA website that they have clear 'Outcomes' which firms should strive to achieve. Outcome 3 states that a Financial Advisor should provide clear information before, during and after the point of sale. If there is no recorded contact then how should that be viewed. The product could have been refinanced with such changes in rates reducing substantially the debt. To me that is poor conduct by the Financial Advisor. As her Financial Advisor surely she had a duty of care, if nothing else to carry out and annual review of clients business etc.

MWT

pbd343 said:

If there is no recorded contact then how should that be viewed. The product could have been refinanced with such changes in rates reducing substantially the debt. To me that is poor conduct by the Financial Advisor. As her Financial Advisor surely she had a duty of care, if nothing else to carry out and annual review of clients business etc.

Unless your mother retained the advisors services to review her affairs on an ongoing basis, their obligation to provide advice ended at the point your mother took the equity release product.

There was no obligation on the part of the advisor to revisit the concluded matter of the ER advice once the product was taken.

If your mother had asked the advisor about a detail relating to the product she had taken then yes, she should have been provided with 'clear information' as per the section you quote above, but that does not extend to proactively reaching out to her and offering refinancing options...

ACG

pbd343 said:

I have seen her file which contains paperwork relating to the Equity Release and a Financial Advisor has informed me that the initial assessment and report provided to mum was very poor and did not contain some of the information which should have been provided in the situation. (1) 
For those of you who have said that there is no need for contact after the product was sold/completed I have researched this and note on the FCA website that they have clear 'Outcomes' which firms should strive to achieve. Outcome 3 states that a Financial Advisor should provide clear information before, during and after the point of sale. If there is no recorded contact then how should that be viewed. (2) The product could have been refinanced with such changes in rates reducing substantially the debt. (3) To me that is poor conduct by the Financial Advisor. As her Financial Advisor surely she had a duty of care, if nothing else to carry out and annual review of clients business etc.

1) What was required in 2004 compared to now is very very different. I have "only" been a broker for 10-11 years and a lot has changed in that time, so bang on an extra 10 years and I can imagine the requirements further back were even less back then.  Also lets not forget, a broker you have engaged is probably happy to slate another broker, it makes them look good to you. In fairness though, the file is probably a bit light. Thats because regulation has been stepped up and up over the last decade. If I look at my files back in 2013 I would probably laugh at how little I had to do compared to today. 

2) The outcomes you refer to were not around back in 2004. But putting that to one side the, after the sale is made relates to after the point where your mother signed up. At that stage, the application goes in, underwriting/valuation takes place, legal work takes place and then the mortgage completes. 

We have clients we speak to regularly, maybe twice a year. We also have clients we have never spoken to again after doing their initial mortgage. There is no requirement on brokers to speak to a customer ever again and there certainly would not have been back in 2004. 

3) It could have been. But again, there is no requirement for the broker to get in contact. You cant have a duty of care forever and a day. Your mum had her brokers number if she wanted to speak to them just as much as they had hers. 

I dont do equity release (I say that just so you can see I have no ulterior motives in this), I am not qualified and this is a good example of why I have no interest in doing it. I just cant be bothered with the families knocking on my door 10-20 years down the line. I am not accusing you of wanting compensation btw, but you would not be the first and certainly not the last. 

You are making assumptions about the broker, they could well be the right assumptions. But your mum did not tell you about the mortgage so its pretty much a given she did not tell you what happened in the meetings and what was discussed. She might have just wanted extra money to be able to enjoy life, treat her kids/grandkids etc. Can you remember what she did 20 years ago? Home improvements, holidays, treating friends/family etc etc? 

I honestly dont know if you are in the right or not. I was not a broker 19 years ago but what you have to understand is that any complaint would be based on the rules as they were 19 years ago, not as they are now. TCF I think came out in maybe 2005/2006 those outcomes were not relevant back then. 

Ultimately though, it does not really matter what a load of randomers on the internet think. You have your opinion and I doubt people on here will convince you otherwise, if the firm no longer exists you could try the FoS, but I think as you say it was pre regulation (I am taking your word on that, I dont know with equity release) then it would just be a waste of time. 

dunstonh

I have seen her file which contains paperwork relating to the Equity Release and a Financial Advisor has informed me that the initial assessment and report provided to mum was very poor and did not contain some of the information which should have been provided in the situation.

A 2004 client file would be very poor compared to a 2023 client file.  Remember that this sale was pre-regulation. There were no regulations saying what a file should contain or what good looks like.

I think the FA you have seen on this has failed to recognise the differences between 2004 and 2023.  Perhaps they are inexperienced and or being disingenuous.  Especially in the reference to "should have been provided" considering it was unregulated at the time.     There have been progressive jumps in regulation, software improvements etc over the years.   To expect a 2004 file to be like a 2023 file is just silly.    A newbie wouldn't know how things were in the past.

There is also the issue of just how much paperwork your mother retained.   A lot of it is likely to have gone in the bin at some stage.

For those of you who have said that there is no need for contact after the product was sold/completed I have researched this and note on the FCA website that they have clear 'Outcomes' which firms should strive to achieve. Outcome 3 states that a Financial Advisor should provide clear information before, during and after the point of sale. 

a) that guideline didnt exist in 2004
b) you are misunderstanding it.    The "After" bit refers to tasks that occur after the point of sale. i.e. how the application is dealt with after point of sale.  Any chasing on the lender etc.  It doesn't mean the customer gets nearly 20 years of free servicing.

. If there is no recorded contact then how should that be viewed. 

Completely normal.  Equity release is a transactional event.  The contract with the adviser ends once the equity release has completed.

The product could have been refinanced with such changes in rates reducing substantially the debt.

Quite possibly.  However, did your mum employ an adviser or look into that herself?  If an adviser is not employed to look at it then it will not get looked at.

 To me that is poor conduct by the Financial Advisor. 

You are wrong.     Unless the customer employs and adviser to provide ongoing servicing (which means paying for it) there is no requirement to do so.      

 As her Financial Advisor surely she had a duty of care, if nothing else to carry out and annual review of clients business etc.

Only if she was employed and paid to carry out those duties.  Just think about it logically.     You are asking for 20 years of servicing without paying a penny for it.   How does the adviser survive if they are not getting paid for the work they do?    

Advisers are employed on a transactional basis or an ongoing basis.       Ongoing means paying for them each year.   You would not employ an adviser on an ongoing basis for equity release as it would not be cost effective for the consumer.  It would be money for old rope for the adviser.  Equity release is a transactional piece of advice/service.

 if the firm no longer exists you could try the FoS, but I think as you say it was pre regulation (I am taking your word on that, I dont know with equity release) then it would just be a waste of time. 

Equity release became regulated on 6th April 2007.  It came in after mortgages.
As the firm doesn't exist, the FOS cannot be used
As the sale took place before regulaton, the FOS could not be used even if the firm still exists.
The FSCS will not look at pre-regulation cases.

ACG

Sorry, just one more thing to add, when brokers submit an application the moment it completes a mortgage lender in essence locks us out of the mortgage. We are only involved during the application stage. 

If a broker calls up the lender the day after completion to ask something as simple as what the balance is, they would not tell us.