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Equity release advisor Key has enhanced its advising process in order to focus more on customization and affordability.
The company has launched an affordability tool, which is available on its advisors portal. It includes fact-finding, product research and sourcing, as well as relevance report templates.
Key has trained its counselors to use the tool so they can include it in their counseling process.
The company will subject all its customers to an affordability assessment which will help in determining the most suitable product and route of advice.
It will look at the repayment structures its clients can manage to assess whether a standard mortgage or retirement interest-only (RIO) product will suit their needs.
Key will also benefit from their referral partnerships so you can recommend pension or investment advice, long-term care financing and debt management solutions.
The company said consumer duties rules set a “higher bar” for the financial services sector and highlighted the importance of sales advice to achieving good customer outcomes.
Key said it reviewed its practices in preparation for regulatory change and considered the flexibility of recent stock issue products as well as future product innovation.
The updated advice process will ensure that personalization is prioritized and “challenge any product bias to ensure a balanced view of all alternatives is properly considered”.
Key said it would eventually publish a client charter based on this approach to set clients’ expectations about what they should expect during the counseling process.
Three goals
Affordability, customization and support for understanding are the three Key objectives of the counseling process.
As part of the supportive understanding goal, the company will fully explain the effect of compound interest as well as the effect of adding fees over the life of the loan so that customers are aware of all costs. It will also recommend the option that meets the customer’s needs with the lowest borrowing cost.
Key will make sure that customers consider withdrawing if they do not immediately need the required funds and advise them not to borrow more than they need.
A minimum two-stage counseling process will also be implemented, so that the client has sufficient time to consider their options. This will be modified to accommodate any vulnerabilities.
The objective of affordability will ensure that if the customer is able to pay, it is recommended to explore this option first. If they have extra income, Key will explain the benefits of using that income to pay the premiums.
The goal of personalization is not to make any assumptions about which product is ultimately chosen until all needs and options have been evaluated, including those that do not require a loaned product.
The company will discuss the alternatives and challenge the client to ensure that they have fully considered the available options.
Key will also give customers a balanced view of all lending options.
The philosophy of renewed advice
Will Hill (in the picture)Key’s CEO said: “As with other advisory firms, we fully reviewed our advisory philosophy and processes prior to introducing consumer duty and made changes designed to align with the required shift from treating clients fairly to delivering good client outcomes.”
“With the range of options currently available, there is often no single right answer and the advisor’s recommendations must demonstrate consideration of all potential implications and why the selected option is judged to be most appropriate.”
He added: “In a rapidly evolving lending sector, this makes providing the best advice complex and requires consideration of a matrix of different risks and benefits.
“Because share issue products do not usually require a compulsory payment, affordability has not always been front and center in the advice process for companies specializing in this sector. However, with increasing client diversity, a wide range of products, and more innovation on the horizon, We are committed to evolving our approach to keep pace with changing needs, a growing market and the increasing expectations of consumer duties.
Shekina is the Business Editor at Mortgage Solutions. She has over four years’ experience in the B2B publishing market, with previous industries including accounting, pets, funerals, hospitality, retail and jewellery. She currently reports on current events in the mortgage market and reaches out to financial clients to produce sponsored content. Follow her on Twitter at @ShekinaMS
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