Reverse mortgage abuse claims not directed at planners: Conlon
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A warning to investors by the Australian Securities and Investments Commission (ASIC) yesterday that consumers were sometimes encouraged to borrow more money than they actually needed was not necessarily aimed at financial planners and other intermediaries, according to Sequal executive director Kevin Conlon.
Conlon said the regulator had given him the clarification that it could well be encouragement of a range of stakeholders including family members and not necessarily the tactics employed by intermediaries.
Conlon said he had sought clarification from the regulator on their media release, as he was concerned about the suggestion consumers were being encouraged to borrow more, particularly given the research that this wasn't the case.
ASIC chairman Tony D’Aloisio made the comments in a media release announcing the launch of a consumer guide, 'Thinking of using an equity release — a consumer guide to reverse mortgages'.
Conlon said he welcomed the ASIC guide as a positive step towards a better understanding of how equity release can assist senior Australians in meeting the challenge of living longer and living well.
"However, I don't think we should underestimate the capability of senior Australians, who it must be said are not unfamiliar with the use of credit, having been a highly successful generation that has amassed significant personal wealth, primarily through home ownership."
There is also clear evidence reverse mortgages are being used wisely, the most recent being a market survey by Deloitte that confirmed reverse mortgage customers draw down only 70 per cent of their total facility approved, and that the most common use of the fund was to supplement income, repay debt and modify homes to make them more suitable for elderly occupants.
Conlon added that the ASIC warning to investors arrived on the same day SEQUAL released its guideline, 'Equity Release Product Process'.
"This guideline is intended for use by Sequal's network of brokers, planners, accountants and lawyers to assist them to adopt appropriate practices dealing with senior clients,” Conlon said.
"The guideline clearly sets out the stages necessary by intermediaries to ensure that reverse mortgage customers make fully informed decisions.
"This guideline, and others we have issued from time to time, as well as our code of conduct, illustrate the contribution Sequal makes towards the professionalism of the reverse mortgage markets.”
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