Ever since equity release became a popular option to increase retirement income, the Financial Services Authority has always urged pensioners to get independent financial advice. Equity release is a complicated financial instrument. To protect your interests, you need competent professional advice.

But you should not get advice from just anyone. There have been instances of mis-selling in the past. When FSA first started regulating lifetime mortgages, it found that more than 7 of 10 financial advisers failed to obtain enough customer information relevant to analysing the suitability of a product to the customer's circumstances, and over 6 of 10 advisers did not fully explain to customers the disadvantages and risks of the scheme.

You should be clear about one thing: financial advice occurs only when the adviser assesses your personal circumstances and matches these with the product that suits you best. Otherwise, the adviser is just offering you a canned product that ignores your needs.

Finding an adviser

There should be financial advisers listed in the telephone directories (e.g. Yellow Pages and Thomson's). You can also locate them on your high street, or you could ask family and friends for recommendations.

You can also call the IFA Promotion free phone Hotline on 0800 085 3250 or visit www.unbiased.co.uk to get leads to local IFAs.

The rule is that firms giving financial advice, or their agents, must be regulated by FSA. The firms and their agents have to comply with certain standards for them to be listed in the FSA Register. When you look for equity release advice at the outset, check the FSA listings of regulated firms and agents (www.moneymadeclear.fsa.gov.uk/tools/check_our_register.html). By choosing only registered advisers, you will be able to file complaints and seek redress with the FSA in case something goes wrong with the investment.

Asking key questions

What qualifications or experience does the adviser have?

Advisers have different qualifications. Some are licensed to dispense advice on three principal financial products -- mortgages, insurance, and investments; others are qualified only for one or two products. Make sure your adviser is qualified and experienced enough to give advice on equity release schemes.

What is the impact of equity release on your welfare benefits? On your long term care funding?

The adviser should be able to give you specific detail about your continued eligibility for welfare benefits if you take out an equity release plan. The primary purpose of equity release is to increase your retirement income rather than cancelling out other benefits and entitlements.

Your retirement planning must anticipate funding your forthcoming long term care needs, so you will want to know how equity release will affect that. If the financial adviser cannot advise on these, you may miss out on important issues and fail to attain the best outcome.

What are your other options?

The financial adviser should be able to discuss all other options (aside from equity release) available to you. Your goal is not to release equity; it is something you want to happen to your retirement life, and equity release is only one of the ways to achieve that goal.

What are the fees to be paid?

What are the fees the adviser expects for himself or herself?

You certainly want to know how much the equity release scheme is going to cost you. There are various fees to be paid, including valuation, legal, and arrangement fees. Besides these, it is best to ask the financial adviser at the outset what compensation he/she expects (commission, one-off fee, or a combination). You can tell the adviser at the outset that you want to pay a one-off fee, if you want to do that.

Clarifying your goals

Make sure your goals for wanting additional retirement income are clear in your mind when you talk to the adviser. Equity release is not the goal here; it is only one of the ways to achieve what you want. The good financial adviser must be able to understand what you want and guide you through the appropriate options, so you can make an informed decision. You should expect the adviser make a thorough assessment of your circumstances to enable a good match with the appropriate product.

For general advice, you can download a free factsheet on 'Raising Income or Capital from Your Home' from the Age Concern England website on www.ageconcern.org.uk.

Enter your search terms Submit search form

Web www.myretirementhelp.com