With the financial climate still in a dire state, and the recession adding increasing pressure to consumers all across Britain, a rising number of older homeowners have decided to turn to equity release programmes over recent months in order to free up some cash from their property and give themselves some extra spending power in what has become a difficult financial situation.

For most people this involves seeking the help and advice of a professional in the equity release market, and there are some advisors that specialise in this field and are apparently trained to offer sound and sensible advice to those looking to opt for equity release.

However, a recent worrying report showed that in some cases these advisors are offering poor advice and failing to follow proper procedures when dealing with equity release customers, which is quite worrying given the increasing popularity of the equity release option.

In fact, a recent mystery shopping exercise was carried out by the consumer campaign group Which? and showed that two thirds of financial advisors failed to pass its benchmark tests, indicating that two thirds of advisors are not up to scratch when it comes to offering advice and assistance in this sector.

Like any other financial product choosing the right equity release plan is vital to homeowners, and this means getting the right advice and the right product, which is where trained financial professionals are supposed to come in.

However, the tests showed that many advisors were failing on a range of things, from failing to recommend the product that was best suited to the client to failing to carry out proper checks such as income checks before recommending a product. Many did not do the proper fact finding searches before recommending a product, and many failed to point out the risks associated with equity release programmed to their clients.

One official from the consumer campaign group said: ‘If you’ve been hit by plunging pensions, it might be tempting to release some much-needed money using your home. However, opting for an equity release plan is a big decision and it’s not one that should be taken lightly.’

Another official from the group said that some advisors had not been providing information on how quickly debt could grow with these schemes. He said: ‘One IFA said there was no chance of using up all the equity in the ‘customer’s’ home ‘unless you live to 150′.’

However, Ship, which is the professional body for advisors in the equity release sector, stated: ‘We believe that when you look at this piece of research, you need to look at what has been excluded as well as what has been included. Which? has criticised the process for advice, but not the actual fundamental outcome of that advice, nor the products themselves. This is a step forward from last year when they branded equity release a ‘product of last resort’.

It added: ‘But continuous improvement is needed. Although there are estimated to be over 7,000 people who have taken the specialist equity release exams, the fact that Which? has found issues with the processes of some of the 40 advisers reviewed shows there is absolutely no room for complacency. Advice is a crucial step in the equity release process – and with each client’s needs being highly individual and unique – one that should be closely monitored to ensure consumers are getting the best help possible. We know that the specialist advisers are acutely conscious of the need for high standards, and that many more generalist advisers are looking more and more closely at equity release, and completing the specialist qualifications. We believe that many of the shortfalls that Which? have found could be due to the process of explaining the product rather than to significant gaps in advisers’ knowledge.’

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