Bob's Blog

FCA will intervene with later life market

26 Apr 2016

The FCA is going to want to see much more customer-focused, fully-rounded advisory propositions aimed at later life individuals.

One gets the sense that when it comes to the later life market, the FCA is unwilling to let the grass grow under its feet for too much longer. Its recent discussion paper on how financial services can be “match fit for an ageing population with growing needs”, was perhaps the very first step in a journey which will result in a series of recommendations, to be followed (no doubt) by official proposals and rules next year.

This is clearly an area where the regulator has some misgivings about how later life consumers’ needs are currently being catered for, and the advice they are able to access and receive. Add in notions of vulnerability, and the government’s own highly interventionist approach to (amongst other things) pensions, long-term care and the like, and you can see why the FCA wants to get its ducks in a row particularly around product relevance and accessibility.

For advisers this approach is bound to draw up some interesting, and potentially challenging, areas. In the mortgage market alone, we have already been embroiled in a post-MMR battle whereby home loan accessibility has seemingly been curtailed, not just for those already in retirement, but those whose terms might run past a traditional state retirement age.

Lenders compliance-heavy approach to the MMR rules resulted in much anecdotal evidence about later life ‘mortgage prisoners’ being unable to secure finance because of the tighter affordability measures. Thus we were presented with client cases where borrowers were caught on their existing SVR rates unable to remortgage away and save money because of lenders’ ‘bolstered underwriting practices’.

Thankfully, there has been some significant movement in this area as lenders, for want of a better phrase, lighten up, but also as a number of players have realised and acknowledged there is a significant ‘niche’ customer base to be targeted here, much of which is of little interest to the mainstream operators. Movement in the maximum age for borrowers and a lengthening of mortgage terms for those in retirement, has been coupled with some serious product innovation, including the development of hybrid products which take into account interest payment and an element of equity release.

That said, the wants and needs of the later life consumer are much wider than just mortgage finance, and we’ve seen increasing calls for more-rounded advisory propositions which cover off as many product needs as possible rather than just one. The recent response from the CML to the FCA’s discussion paper highlighted the difficulty in securing an adviser base which is able to operate in multiple sectors because of the need for separate qualifications/authorisations, and the fact that most advisers have a specialism that they tend to stick to.

What the CML called the ‘compartmentalising of financial advice’ will be a real obstacle in terms of allowing later life consumers to have access to a ‘one stop shop’ for all their financial product needs. We may even find that this is impossible to deliver in any real number but what we perhaps can do is create an environment where advisers in those separate areas have a much more user-friendly way to refer clients on to relevant specialists in such a way that the client doesn’t feel they are being dragged from pillar to post.

In a sense, as a distributor, it’s what we are trying to offer our members anyway and there are already others specifically operating in the later life space, such as the Later Life Academy, who are pulling together those various product needs and supporting advisers with training, qualifications and also the commercial aspects of working with other specialists.

This is in its relative infancy but, given the ‘compartmentalisation’ we may have to look at clients accessing their advice through a variety of sources but controlled (if you will) from one central hub. What seems certain is that the FCA is going to want to see much more customer-focused, fully-rounded advisory propositions aimed at later life individuals. How we get to that point will be interesting, but as always I suspect there will be plenty of ‘carrot and stick’ to keep the profession on its toes.

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