Undue influence: Protecting customers’ interests during the equity release advice process

Rebecca Devonport Deputy Director of Compliance

Published on 31st August 2021

In the first of two pieces, we explored what undue influence is and what effect it can have on both customers and the wider advice process. In the second, we're going to look at the practical steps you can take to offset its effect and safeguarding customers.

Financial institutions need to get the balance right between offering a seamless service and protecting customers' interests - understanding your customers' circumstances will allow you to not only respond to their financial needs, but also protect their interests.

Responsible financial institutions will have procedures in place to identify cases of undue influence, and steps will be taken to protect their customers from unauthorised parties. But what can you do to identify undue influence during the advice process?

There are some practical steps you can take if you suspect undue influence:

Undue influence occurs when someone is in a position to deliberately influence the will of other people, and does so to obtain an unfair advantage. There are four key factors to consider:

  • Speak to the applicant directly

    This may seem like a simple action, but dealing directly with the applicant will help you gauge their awareness and understanding away from any outside influence. If the influencer is at the meeting, can they be separated from the client to complete paperwork or can a follow up meeting be arranged?

  • Use alternative contact points and methods

    If you suspect that the application is been driven by someone other than the applicant, try calling at a time when the applicant is alone and can speak freely - this could be a positioned as a follow-up call to clarify details. Information can also be sent to the client in writing so that they have time to read through documentation and reflect on their choices.

  • Allow the client time to assess their choices

    Influencers will often put pressure on their victims to act quickly at particularly vulnerable moments in their life. Assess the reasons why a client is rushing through an application and if their urgency is proportional to the situation.

  • Confirm your understanding of goals

    Use a follow-up call to recap the objectives and the amount of the loan, and to assess whether the answers coincide with what you were told at application. A change in use of funds could indicate that the true purpose is driven by the influencer.

  • Include a neutral third party

    Ask the client if they would like a neutral third party to attend your meetings - this could be a trusted family member who has no connection to the suspected influencer.

  • Seek advice and support

    If you have suspicions, speak with your colleagues and your compliance function. You should flag your suspicions with your firm as soon as possible so that assessments can be made at each contact point, ensuring that your colleagues will treat the case with care and due diligence.

  • Document your conversations

    This will evidence the steps you have taken to responsibly assess suitability. By law, a transaction may be set aside if it was completed by the influence of one person over another.

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