The Vulnerable Customer and the Equity Release Sale
Joan, 79, lives alone and wants to release £70,000 from her £320,000 home to help her grandson with a deposit. She has early-stage dementia (diagnosed six months ago) and her daughter attends the meeting. Joan is keen and says she understands. The adviser notes she repeats questions and seems confused about the difference between a lifetime mortgage and a home reversion plan. The product recommended is a lifetime mortgage with a fixed rate and a no-negative-equity guarantee. The daughter is pressing for a quick completion.
1. How should the adviser handle capacity, vulnerability and the presence of the daughter?
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The adviser must assess mental capacity to make this specific decision at this specific time. A dementia diagnosis does not automatically remove capacity, but her confusion and repeated questions are red flags. The adviser should use a structured approach (e.g. the MCA 2005 two-stage test: does she understand, retain, weigh and communicate the decision?) and consider involving an independent advocate or a specialist. The daughter's presence creates a conflict risk: the adviser must ensure Joan is not being unduly influenced and should, where possible, speak to Joan alone. If capacity is doubtful, the adviser should not proceed without appropriate safeguards (e.g. a solicitor, an attorney under a lasting power of attorney, or a best-interests decision). The adviser should document the assessment and the reasoning.
2. What product and disclosure issues arise, and what should the adviser do before completion?
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Equity release is a high-risk, irreversible product. The adviser must: (1) confirm the recommendation is suitable given her age, health and the purpose (helping a relative is a legitimate aim but the adviser must check she can afford the rolled-up interest and that the no-negative-equity guarantee is understood); (2) explain the difference between a lifetime mortgage and home reversion clearly, in plain language, and check understanding (teach-back); (3) ensure she has taken independent legal advice (a requirement for equity release); (4) disclose the effect on her estate and means-tested benefits; (5) not be rushed by the daughter - the adviser should slow the process and record the pressure. If understanding cannot be demonstrated, the adviser should decline to proceed and refer for specialist advice.