Why checking Equity Release case files is important?

Checking a sample of case files is fundamental to adviser supervision. Many advisers and firms, however, recognising the additional risk associated with later life lending advice, choose to scrutinise 100% of equity release files. It is a way of testing that good market standards are being applied to all later life advice cases and that customers are being treated consistently by an adviser, and across your organisation. The file check is also a way of being best prepared that, should a complaint arise that ends up with the Financial Ombudsman Service, the file is complete and there are no loose ends which the recommendation fails to cover.

At what point should files be checked?

It is best to get your recommendations right first time. Having to send addenda or replacement suitability reports is embarrassing and can lead to customers questioning adviser competence. However, does the delay caused by checking files before presenting advice impact on KFI validity and handling your relationship with customers?

Our preference is check files before advice is provided to customers. We won’t take you on as a client unless we can commit to pre-checking cases in line with the service standards in the checking process outlined below.

What do we check?

Client engagement, encouraging thoughtful and accurate answers to questions, following up on clues to motivation or vulnerability and generating an open conversation that thoroughly explores customer needs and circumstances are adviser skills that can only be verified through observation. These are not issues that can be assessed through file checks. We can, however, examine the information that results from these conversations and which will remain as contemporaneous evidence of the case. This justifies the recommendations and preempts any future difficulties.

The aim of the file check is to establish that sufficient information has been gathered for the adviser to give advice, and that the recommendations arise naturally from the details recorded. We confirm whether the picture painted suggests customer vulnerability and whether the advice takes account of what is in their best interest. The clarity of information included in the suitability report is assessed as is the evidence that a sales process that is likely to lead to good customer outcomes has been employed.

We usually confine equity release file checking to documents directly related to giving advice. these include:

We don’t usually check basic ID and verification of address, or that the client / fee agreement has been completed successfully but these things can be included at your request.

The Equity Release File Checking Process

We believe we have a process that ticks all of the boxes.
The Adviser:

1. Completes initial disclosure and fact finding
2. Gathers the appropriate documentary evidence from the client
3. Carries out research, checks for non-standard cases, benefits check as appropriate etc
4. Formulates advice and completes a suitability report ready to present to customers

At this point the relevant documents are submitted for an independent check. We offer maximum services timescales of 5 working days, but the response is within a couple of days 90% of the time. Files are checked against a consistent set of standards developed to meet expectations of the Financial Services Authority, the Equity Release Council, and applying the outcome of financial Ombudsman adjudications.

The outcome of a file assessment will be that the file and recommendations appear:

• Suitable: Meaning that the file is complete, and the recommendations are consistent with sound advice standards. The presentation should proceed promptly.
• Unclear: Meaning that there are minor flaws or errors in relation to the nitty gritty of the advice or the way it is presented. The presentation should proceed subject to minor alterations, often to wording in the suitability report, without further file checking.
• Unsuitable: Meaning that there is some aspect of the file that appears contrary to sound advice. The case can usually be made suitable with additional information or an explanation of how the recommendations have been formulated. We would usually like the opportunity to review the file before advice is presented to customers.

Ultimately a suitable file will be one where a third party without financial services experience would be able to understand the customer needs and circumstances, and be satisfied the advice meets their needs safely.

Contact us for further information or to see how we might work together.