Advisers urged to act ahead of Consumer Duty second phase

The Equity Release Council has issued a reminder to advisers of their responsibilities under the next phase of the FCA’s consumer duty, which comes into force on 31 July 2024.

The “closed book” phase of the duty means consumers on products that are no longer sold or renewed must come under the same scrutiny as those on current products.

According to the Council, this phase could be even tougher to implement than phase one because closed books of mortgages can be decades old and are often sold on without the full client history.

While equity release is subject to the duty, the Council suggested it could provide a lifeline to customers of other products – such as mortgage prisoners and interest-only customers without repayment vehicles – who could be identified under the duty.

Director of risk, policy and compliance at the Equity Release Council, Kelly Melville-Kelly, said that while providers shoulder the most responsibility, advisers have a key role to play too.

“The Consumer duty is about fairness,” Melville-Kelly commented. “Firms must act in the best interests of their customers and take reasonable care to avoid causing harm, at all times.

“Embracing this proactive approach during the open book phase has meant that organisations have had to update and change their processes, but our members have risen to the challenge. Applying the same scrutiny to closed book customers is going to be harder still.”

Melville-Kelly also highlighted that some firms will have inherited closed books which present an “even greater challenge”, as many of the originator firms are no longer in market.

“For providers, termed manufacturers in the duty, this could mean unpicking legacy systems that have long since been archived,” she added.

“For advisers, or distributors, it’s about working with the providers as well as checking client records to see if any are on closed book products and ensuring they are kept informed of their options.

“They also need to ensure that if a client’s circumstances have changed, there is an assessment of the ongoing suitability of the product, with particular attention paid to vulnerable customers.”



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