FCA analysis shows that low financial resilience affects a significant proportion of UK adults. The Financial Lives Survey (May 2024) estimates that around one in four adults have limited ability to withstand financial shocks, often due to low savings, heavy credit commitments or difficulty keeping up with bills. The FCA has been clear that people with low financial resilience are not an exception but, for all firms, a core part of their customer base.
In March 2026, the FCA published its review of second charge mortgage firms, highlighting both good and poor practice in advice quality, affordability assessments, and the treatment of vulnerable customers. While the review focused on second charge lending rather than equity release, the implications for the equity release market are clear and should not be overlooked.
This review does not stand in isolation. The FCA’s September 2023 multi-firm review of later-life mortgage firms found widespread weaknesses in advice suitability, firms poorly considering borrowers’ income and expenditure, minimising discussions around alternatives, and incentivising sales at the expense of customer outcomes. Almost 400 financial promotions were removed or amended as a result. Sheldon Mills, Executive Director of Consumers and Competition, was unambiguous: poor quality advice is unacceptable and the FCA will continue to scrutinise this market.
The common thread running through these reviews is a consistent concern around vulnerability, and specifically, low financial resilience. This is one of the four drivers of vulnerability identified in the FCA’s finalised guidance FG21/1, and it is arguably the most directly relevant to equity release. Customers with unsecured debt, limited income buffers, and reliance on state benefits are not marginal cases in this market. They are a core part of it. The firms that get vulnerability practice right will not only reduce regulatory risk, they will deliver better outcomes for the customers who need them most.
Where the FCA Has Found Weaknesses
Across both the second charge and later-life mortgage reviews, several recurring themes emerge that equity release firms should treat as a direct prompt for self-assessment.
- Debt consolidation advice — advisers recommending equity release to repay unsecured debt without exploring the debt’s background, purpose, remaining term, or whether alternatives, including creditor negotiations or debt management plans, were appropriate. The FCA found that some advisers encouraged additional debt consolidation solely to pass affordability tests without clear reasons.
- Affordability and resilience — income and expenditure assessments that fail to stress-test the customer’s position post-completion, or that guide conversations to understate actual spending. The second charge review found intermediaries omitting declared expenditure items when passing information to lenders.
- Vulnerability identification — generic tick-box assessments rather than individualised exploration of a customer’s circumstances. The FCA’s March 2025 review of firms’ treatment of customers in vulnerable circumstances reinforced that vulnerability is not binary, it exists on a spectrum, can be temporary, and must be actively explored rather than passively noted.
- Suitability versus eligibility — conflating a customer’s ability to qualify for a product with whether it is genuinely in their best interest. The later-life mortgage review found firms steering outcomes in favour of lifetime mortgage products rather than testing alternatives.
- Record-keeping — files that lack documented rationale for the recommendation, personalised risk explanations, or evidence that alternatives were considered and discussed.
- Outcomes monitoring — firms testing narrow indicators such as acceptance rates or short-term satisfaction at fund release rather than tracking whether advice is delivering good outcomes across the customer lifecycle.
The FCA’s message in both reviews was direct: raise standards or expect supervisory consequences. Equity release firms operating in the same regulatory environment, serving similar customer profiles, and facing the same Consumer Duty obligations should treat this as a clear signal of the regulator’s direction of travel.
What “Good” Looks Like: Applying FG21/1 to Equity Release
FG21/1 provides the framework: Identify, Respond, Evidence, Monitor. Applied to the specific context of low financial resilience in equity release, this means more than completing a vulnerability section in the fact-find. It means designing an advice process that creates the conditions in which customers feel safe to share relevant information, and evidencing that the process worked.
Identify
Identification begins in the fact-find but should not end there. Structured prompts, covering reliance on state benefits, material unsecured debt, limited income buffers, adverse credit history, and capacity to absorb unexpected costs, help ensure that low financial resilience is actively explored. However, effective identification depends not just on what is asked, but how and when it is asked. Firms can support customers by clearly explaining why these questions matter, using normalising language that reduces stigma, and creating space for open discussion rather than relying on binary or tick‑box responses.
Most customers in vulnerable circumstances do not proactively disclose their situation. They may not recognise their own vulnerability, may feel embarrassed, or may fear that disclosure will affect their application. Advisers should therefore be alert to behavioural cues, allow conversations to develop over time, and provide reassurance that identifying vulnerability is intended to improve support, not restrict access. The responsibility to identify vulnerability sits with the firm, not the customer.
Respond
Responding to identified vulnerability means adapting the advice process, not just recording that vulnerability exists. Where a customer is seeking to use equity release to repay unsecured debt, the adviser’s role goes beyond confirming the balance. A thorough understanding of the debt’s background is essential: how it was incurred, the remaining term and repayment structure, whether the cost of the debt is higher or lower than the equity release rate, and whether the customer has explored alternatives including negotiating with existing lenders or charitable debt advice. Effective response may also require adjustments to how advice is delivered, not just what is discussed. This can include slowing the pace of the process, allowing additional time for reflection, checking the customer’s understanding of long‑term implications such as compound interest and estate impact, and clearly distinguishing between short‑term financial relief and long‑term suitability. Advisers should consider whether the involvement of a trusted third party would support informed decision‑making, while remaining alert to the risk of undue influence.
Responding appropriately may also mean providing information in accessible formats, personalising explanations of benefits impact, and signposting to free, independent debt advice services such as StepChange or National Debtline.
Evidence
Evidence is where many files fall short. It is not enough to have had the right conversation, the file must demonstrate that the conversation happened, what it covered, and how it informed the recommendation. This includes a documented vulnerability assessment specific to the individual customer rather than a template response, a record of how identified vulnerability factors were taken into account, personalised explanation of key risks including compound interest, estate impact and benefits implications, and evidence that alternatives were considered and why they were not recommended. Where alternatives are discounted, the rationale, and the customer’s understanding of that rationale, should be clear and evidenced.
Where a customer is under financial strain, the bar for evidencing informed consent is higher. The file should demonstrate that the decision was free from undue pressure, that key risks were explained in plain English, and that the customer acknowledged the risks, ideally in their own words, not just by signing a standard declaration.
Monitor
Consumer Duty requires firms to assess whether their advice is delivering good outcomes over time, not just at the point of sale, and to evidence those outcomes through meaningful management information (MI). For customers with low financial resilience, this requires more than isolated file checks or one‑off satisfaction measures. Firms should build proportionate post‑completion touchpoints into the advice lifecycle and use MI to track outcomes at both individual and cohort level.
Monitoring should enable firms to identify whether customers with identified vulnerabilities experience different outcomes to those without vulnerabilities and, critically, whether those differences are justified. This includes comparing indicators such as suitability findings, post‑completion complaints, changes in financial position, reliance on additional borrowing, and the frequency of early warning indicators. Where outcomes for vulnerable customers diverge from those of non‑vulnerable customers, firms should be able to explain why, and demonstrate what action has been taken in response.
A robust Outcomes Monitoring framework is central to this. Effective frameworks assess not just whether vulnerability has been recorded, but the quality of the assessment, the proportionality of the response, and the extent to which vulnerability considerations are clearly linked to the recommendation. Scoring vulnerability evidence quality, rather than its mere presence, allows firms to identify trends, target training, and test whether adjustments to the advice process are delivering improved outcomes over time.
Taken together, this shifts monitoring from a narrow compliance exercise to a genuine outcomes assessment. The question moves from “did the adviser complete the section?” to “did the advice process adapt appropriately, and did it result in a good outcome for this customer compared with others in similar circumstances?”
What Firms Should Be Doing Now
The gap between current practice and good practice is, in most cases, not large. It does not require new systems, new products, or significant additional resource. It requires better questions, more specific documentation, and an outcomes framework that rewards quality rather than just completion.
- Review fact-find templates for structured vulnerability prompts covering all four FCA vulnerability drivers, with specific prompts for low financial resilience in debt consolidation cases.
- Introduce a debt background checklist for cases where equity release is recommended to repay unsecured debt, covering context (how the debt accrued), purpose, remaining term, interest rate, and alternatives explored.
- Personalise benefits impact analysis — replace generic statements with a customer-specific assessment of which benefits are in payment and how equity release proceeds may affect entitlement.
- Update suitability report templates to include a dedicated section for vulnerability evidence requiring a specific, individualised narrative rather than a template response.
- Add a QA / Outcomes scoring dimension for vulnerability evidence quality, not just whether the section was completed, but whether the assessment is specific, proportionate, and linked to the recommendation.
- Implement a post-completion touchpoint for customers identified as having low financial resilience, a brief check-in at three, six or twelve months to confirm the customer’s position as well as identify any emerging concerns or if additional support is required.
- Train advisers on the emotional and behavioural dimensions of debt — not to make them counsellors, but to ensure they are comfortable having sensitive conversations and recognising when a customer may need additional support.
The Bigger Picture
Low financial resilience is not a niche concern. In the current economic environment, with sustained cost-of-living pressures, elevated unsecured debt, and an ageing population, it is a feature of a significant proportion of equity release cases. The customers who present with material debt, limited income buffers, and reliance on state benefits are not peripheral to this market. They are central to it, and they deserve advice that is genuinely tailored to their circumstances.
The FCA’s regulatory trajectory is unmistakable. The second charge review, the later-life mortgage review, the March 2025 vulnerability review and the launch of MS26/1 all point in the same direction: firms must move beyond process compliance and demonstrate that their advice is delivering genuinely good outcomes for vulnerable customers. Good vulnerability practice is good advice practice; the two are not in tension but are fundamentally inseparable.
This message has become increasingly consistent across FCA reviews, speeches and market studies. Whether addressing vulnerability, Consumer Duty, later-life lending or retirement adequacy, the regulator’s expectation is clear: firms must look beyond product suitability and procedural compliance and be able to evidence that customers achieve positive outcomes in practice.
Emad Aladhal’s June 2026 speech on later-life lending reinforced this theme. Describing housing wealth as a potential “fourth pillar” of retirement funding, he emphasised that sustainable market growth will depend on consumer trust, effective advice and demonstrably good customer outcomes. These conclusions closely align with the findings of Square 4’s Consumer Duty research, which identified outcome-based advice, customer understanding and vulnerability management as increasingly interconnected drivers of regulatory compliance and commercial success.
How Square 4 Can Help
Square 4 works with equity release firms, lifetime mortgage advisers, and later-life lending providers to strengthen advice quality, vulnerability frameworks, and Consumer Duty readiness. Our support includes:
- Independent file reviews with scored vulnerability evidence assessment
- Fact-find and suitability report template redesign aligned to FG21/1 and Consumer Duty expectations
- QA and Outcome Monitoring Framework development with outcome-focused MI measures for low financial resilience cohorts
- Adviser training on sensitive conversations and vulnerability identification
- Consumer Duty annual assessment support and Board reporting
Sara Haworth Principal Consultant
Dean Ritchie Consultant
