The PFS has stated that intermediaries could be targeted by mis-selling claims if they fail to ensure the lender they recommend will be able to supply capital further down the line.
The insurance provider agreed that adequate research needed to be done to ensure clients are getting the right deal for their circumstances.
Jan Holt, head of lifetime mortgages sales at Prudential, said: “Prudential agrees that a detailed due diligence should be carried out on any provider recommending equity release drawdown products, to ensure all facts and risks about the product are documented in the recommendation to the client.
“Every drawdown product is different and customers’ needs vary. Different products will suit different people and it’s important that mortgage advisers clearly understand the features of the various products to ensure these different and changing needs are met, beyond the initial loan.”
The PFS also stated that financial strength was a prime factor for intermediaries when selecting a drawdown policy. Prudential concurred that it was an important issue. Mortgage intermediaries doing sufficient research before they choose a product for their client can ensure this is done.
Holt added: “The importance of financial strength is apparent across the whole of the financial services industry. If you look at the investment and pensions markets, no one would use a provider that wasn’t financially secure, so the same principle should apply to the equity release mortgage market.”
However, Jon King, chairman of Safe Home Income Plans (SHIP), said: “You have to look at the safeguards that are already in place throughout the lifetime market. Drawdown is now 20 per cent of the market and it has been universally welcomed as a product innovation. I am sure the regulator would be happy with the innovation drawdown has brought as the client is borrowing and owing less than with a normal mortgage.”
