The Equity Release Council has launched a Legal Guide to Equity Release as well as a new report, Vulnerability Vigilance, exploring the most common customer vulnerabilities which legal advisers can encounter.
The study took an in-depth look at a sample of more than 300 cases from last year where the customer had been identified as potentially vulnerable.
Among these customers, the research highlighted health (44%) and capacity (23%) issues as the most common types of vulnerability identified as part of the independent legal advice process. In almost a quarter (24%) of cases where vulnerability was highlighted, the legal adviser identified more than one vulnerability. David Burrowes, Chair of the Equity Release Council, said:
“Independent legal advice is an essential part of the process of releasing equity, and it is vital we have the knowledge and skills in place across the legal sector to reflect and support the modern market.
“Our new guide will help to ensure a common understanding of the role of legal advice and its contribution to ensuring good consumer outcomes. It will also challenge more firms to consider whether they can offer this service to customers and what lessons they might learn from those who already successfully operate in this space.
“Meanwhile, our members’ insights, gleaned from supporting vulnerable consumers show the benefit of involving specialist legal advice in important financial decisions, particularly in later life when customers can be more prone to vulnerability.
“Equity release can be a transformative financial product which, when used appropriately, can provide an important lifeline for pensioners, improve living standards and enhance the lives of their families.”
All customers who take out equity release must receive independent legal advice to ensure they fully understand the risks and implications of their choices, the product details and are free from duress. The legal adviser is responsible for advocating for their client and should a vulnerability be identified, they will help them to obtain the specialist support they need to decide whether equity release is right for their individual circumstances.
Over three quarters of cases (78%) where the client was flagged as potentially vulnerable were able to proceed with additional support. Of those where it was not possible or appropriate to proceed, capacity (25%), health (25%), duress (16%) and undue influence (10%) were the primary vulnerabilities identified. Claire Barker, Chief Executive Officer at Equilaw, said:
“The launch of the Legal Guide to Equity Release is a significant step forward for the industry and our hope is that it inspires best practice from lawyers who want to work in the equity release sector.
“Lawyers need to be aware that far from being a simple remortgage, equity release transactions require them to advocate on behalf of their client and ensure customers fully understand the implications of their choices as well as the product details.
“There are many other factors in play, all of which are signposted within the guide which has been designed to be an ongoing point of reference. This will be particularly useful for those who are new to the market and may be unused to the specific requirements involved with later life lending products.”
A total of 670,000 customers have accessed £48bn of property wealth via Council members, with the benefit independent legal advice, since it was first mandated in 1991.
The legal guide has been launched to educate additional firms and encourage more firms to consider how they can better support equity release customers, the Council launched its Legal Guide to Equity Release at its Annual Summit in Westminster on May 23rd. Carol Nuttal, Managing Director at Adlington Law, said:
“Moving a client from being interested in potentially releasing equity to eventually taking the product out is a team effort and too often the vitally important role that the legal profession plays goes unacknowledged. We are therefore delighted to see the launch of this guide
which is designed to build understanding amongst the wider sector and encourage more firms to offer this service to their clients.
“With the typical equity release customer being almost 70 years old, there is no doubt that they are more likely to be vulnerable than some other age groups. Therefore, it is vitally important that they have someone whose sole purpose is to advocate on their behalf. Whether they are dealing with health or capacity issues or there are concerns about duress, their independent legal adviser works to ensure they understand the choices they are making and they are in their best interests.
“This is a service that is unique to equity release and highlights the commitment of the industry to ensuring that there are enhanced safeguards in this sector.”
