FCA review into later life mortgages highlights the need for robust QA processes

Following its multi-firm review into later life mortgages, the FCA has revealed that almost 400 financial promotions have been taken down or amended after failing to meet regulatory standards over ‘misrepresentative content’.

The initiative saw the regulator work with the largest intermediaries of these products – which together comprise almost half of all later life mortgage sellers – to improve the quality and transparency of their advice processes. A report detailing key findings from the review, along with expectations for businesses, was published on 14th September.

The reasons for flagging advertisements as sub-standard included offering inaccurate or misleading information, or otherwise highlighting the benefits of a product without adequately explaining the potential risks. The FCA also noted cases of firms using their ‘FCA regulated’ status as a promotional tool, which is forbidden under the current guidelines.

Equity Release and vulnerability: understanding the risks of later life mortgages

As the most popular form of Equity Release product, later life mortgages are often the go-to choice for customers looking to release money tied up in the value of their home. As the name suggests, the target market consists largely of older adults – a demographic who often carry a higher risk of vulnerability due to factors including lack of a regular income, health issues and social isolation.

All of these compounding concerns highlight the need for clear customer advice, particularly when dealing with potentially complex financial products such as Equity Release. The FCA echoed this sentiment in its Business Plan 2022/2023, alongside a pledge to review its previous findings surrounding poor-quality advice within the market.

Fast-forward to today: the latest review concluded that some firms were failing to properly consider the borrower’s income and expenditure before dispensing advice. It also found multiple instances of firms offering later life mortgages without assessing alternative products that may have been more suitable.

And perhaps most concerning of all, the study suggested that some firms were prioritising making sales over providing detailed, personalised and impartial advice, steering customers towards later life mortgage products even against their own best interests.

Firms need to scale up oversight – but is this possible without scaling up costs?

When dealing with both complex products and a target market susceptible to signs of vulnerability, it’s critical that firms have a rigorous Quality Assurance process in place to ensure customers are being offered advice that helps them achieve their goals in the most effective, low-risk manner.

Maintaining this level of oversight – without sacrificing attention to detail – can prove an ongoing challenge without permanently dedicating significant budget, time and human resource to the assignment.

That’s why regulated businesses are turning to AI RegTech to help their teams automate time-consuming tasks and unlock greater visibility of the most high-risk cases in need of review.

Maximise QA efficiency and effectiveness with Document Intelligence

Recordsure’s Document Intelligence platform has been purpose-built to help firms speed up their case reviews with a level of quality and consistency that’s unachievable by manual processes alone.

Harnessing the latest in AI technology, our solution allows firms to:

• Identify – Document Intelligence dates and classifies every document within a case file, faster than human reviewers ever could, with a 95% accuracy rate. This allows users to skip straight to records of interest and halve their overall handling time.
• Review – an easy-to-use interface gives users a consistent navigation view to search complex documentation for key information and flag sections critical to the review, offering real-time integration with CRM or Workflow applications.
• Discover – Document Intelligence delivers a smart summation of the entire case according to review theme, allowing reviewers to work across multiple files at once instead of repeatedly flicking between documents.

Document Intelligence’s unique features enable firms to focus their skilled people solely on skilled tasks and set aside the 95% of cases that show no issues, instead focusing entirely on the most critical instances of sub-standard advice or conduct risk.

Real-world applications of AI RegTech

• A ‘big 4’ consultancy in Australia has already used these tools to help a 500-strong team review over nine million documents for a major remediation project – ultimately improving on its initial ambitious target of a 40% reduction in handling time.
• A major UK consultancy had similar success using Document Intelligence to streamline its QA processes, empowering it to expand its managed services provision far beyond what was previously feasible.