FCA to look at adviser fees, sourcing systems and holistic advice in new later life mortgage study

The FCA has announced the launch of a new study into the later life mortgage market.

The study will examine whether lifetime and retirement interest only mortgages are delivering good outcomes for consumers, and what needs to change as demand grows.

It will focus on barriers to entry and growth for new providers, consumer decision-making, and holistic advice, alongside the wider role intermediaries play in the market.

Recent affordability pressures and higher interest rates mean that more consumers will have to make standard mortgage repayments into retirement, and the FCA says lifetime and RIO mortgages could play a greater role.

The FCA noted that there is "broad support for making advice more holistic" and is working to define the scope of holistic advice, the outcomes it should aim to achieve, and the regulatory change that may be needed to support it. 

It will also look into how commercial arrangements and relationships create incentives between firms in the supply chain, such as the commissions and referral fees that providers pay advisers. 

The FCA said they may help remunerate the costs of advice and facilitate competition but "could, depending on their design, also create incentives for advisers that do not align with consumers’ interests".

It will also explore the role of sourcing systems, how they affect advisers’ recommendations and whether commercial relationships affect how products are filtered and ranked, and how information about them is displayed. 

The FCA expects to publish a progress update and proposed next steps by the end of 2026. 

In the meantime, it will engage with firms, industry groups and stakeholders to gather their views and aims to send firms Requests for Information in the coming weeks.

Separately, in a speech given today, Nikhil Rathi, chief executive of the FCA, said: "For those wanting more personalised advice, we will be proposing next week to simplify rules – expanding access for consumers while reducing complexity for firms."

Jamie Jenkins, director of policy at Royal London, commented: “Royal London welcomes the FCA’s terms of reference for the later life mortgages market study, in particular its focus on the importance of holistic advice and the role of funding.

“Supporting people to make informed decisions in later life means looking at pensions and housing wealth together, rather than in silos, and ensuring the advice framework enables this in practice.

“As the Pensions Commission continues its important work on the future of retirement savings, it is vital that regulation of the later life market supports joined up solutions that enable people to make the most of all their assets and achieve better outcomes in retirement.”