Streamline rules on investments and borrowing advice, says Leeds chief

Peter Hill, chief executive of Leeds Building Society, said the current regulation was inadvertently restricting both lenders and borrowers in later life.

The Financial Conduct Authority (FCA) has launched an investigation into financial ageism and is currently looking at how banks and building societies treat older customers.

But Mr Hill said one of the main barriers for customers approaching retirement age was the complexity surrounding investment and mortgage advice.

“The regulatory regime around investment advice is different to the regime around mortgage advice and I think particularly with the pension changes that are taking place, what we really need is an holistic advice regime where advisors can look at both investment and borrowing at the same time,” he said.

He added: “Particularly when looking at retirement planning, there are decisions to be made both in terms of borrowing and investing but at the moment the two regimes do not come together and the FCA review could well lead to an opportunity to open those regimes up.”

The financial services industry has qualified mortgage advisors and qualified investment advisors but Mr Hill said the FCA needed to create a bridge between the two regimes so banks and building societies can provide advice both for investment and borrowing. “At the moment it’s very difficult to do that and it’s not cost effective,” he said.

He added: “It’s complicated and there would be a lot of steps but the initial step needs to come from the regulator.”

A major area of focus for the FCA’s investigation is ageism in the mortgage market as some borrowers are being told they are “too old” when they apply for loans.

Mr Hill said one of the limiting factors in later life borrowing is that lenders look more closely at repayment strategies.

He added that there was an opportunity for more flexibility within the regulatory system which currently has different rules for mortgages which amortise and are repaid at the end of the term and lifetime mortgages, which are secured against the home and do not need to be repaid until the person dies or goes into long-term care.

“They were once seen as two completely different markets but the lines are much more blurred now that we no longer have a formal retirement age, lifestyles have changed and people operate differently, so more flexible solutions are required,” he said.

He added: “I think it would be good if the reality of modern life was recognised and more flexible rules were introduced to allow greater transition between a repayment mortgage and a lifetime mortgage.

“I think that will unlock opportunities for lenders who are naturally keen to comply with the conduct of business rules.”

There are also complaints that elderly people who do not use smartphones or the internet are being unfairly excluded from preferential online deals and services, another area the FCA is investigating.

Mr Hill said he did not believe the society’s older customers were missing out on special online deals because they were not eligible for many of those products.

He added that the complexities around the financial needs of older people meant they should seek advice before signing up to certain mortgage products.

“I think all of this is complicated and I don’t think this is an area for execution only over the web,” he said.

“People need advice so I don’t feel that later life borrowers are shut out because the way in which these products are distributed mean they aren’t available for self-select over the internet anyway,” he added.