Posing as customers, Which? researchers visited 40 advisers and found that only a third of them met all the benchmarks for good advice set by Which? Overall, five out of 12 equity release specialists passed the Which? test, compared with eight of the 28 independent financial advisors (IFAs).
Advisers need to conduct a fact-find on each customer before they can give a suitable recommendation. Twenty three failed to carry this out to the expected standard and seven didn't even ask about the researcher's income.
Equity release has several risks that should be flagged up. Some advisers didn't mention how quickly the debt would grow or discuss the effect of compound interest. One IFA said there was no chance of using up all the equity in the ‘customer's' home ‘unless you live to 150'.
Which? was also disappointed that almost half of the advisers didn't mention or dismissed out of hand home reversions, one of the two main types of equity release plans.
Some advisers were backwards in coming forwards about their fees too - instead of disclosing the details early on in the advice session, 13 advisers didn't discuss this until later on and a further five didn't mention them at all.
Martyn Hocking, Editor, Which? magazine says: "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.
"Which?'s investigation has uncovered some major flaws in the equity release advice process. We'd like to see a tightening up of the advice process but, in the meantime, if you're considering it, make sure you visit two or three suitably qualified independent advisers to be sure you're making the best decision based on the options available to you."
Which? is the only organisation outside of the financial services industry to test the quality of financial advice in this way and has been reporting on it for over 20 years. More information about getting the best advice on equity release is available at www.which.co.uk/equityrelease
