Undue influence: How to identify undue influence in the equity release advice process

Rebecca Devonport Compliance & Risk Manager

Published on 31st August 2021


As an industry, we've a duty to ensure that customers' best interests are both met and protected at all points. In the first of a pair of pieces, we'll take a closer look at undue influence - namely how it can manifest itself and how you can spot it, and the steps you can take to mitigate the risks and potential influence.

Customers who chose to apply for Equity Release products benefit from a robust framework of regulation requiring both independent financial advice and independent legal advice, but often they will choose to involve a family member or trusted friend. The decision to release equity from their homes is a big decision, and it's natural for them to seek the guidance of their support network.

The equity release advice process actively encourages customers to discuss their financial position with their beneficiaries to ensure they are comfortable with the long-term impacts of taking out a lifetime mortgage. Involving a trusted person will often provide the extra assurance and support that the customer needs to understand the product, but how can you differentiate between a relationship of support and one of undue influence?

What is 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:

  1. Relationship

    The influencer will usually be placed in a position of trust, which allows them to lead the applicant in their decisions. This could be a family member, friend, romantic interest, or a care giver, but could also extend into professional relationships such as an adviser or medical professional.

  2. Motive

    Financial gain is usually the main driver when an influencer leads the applicant into decisions they otherwise would not have made. This will ultimately benefit the influencer but will result in loss of funds or assets for the victim.

  3. Vulnerabilities

    The victim may be in a position of particular vulnerability due to their age, mental health or physical health - but this is not always the case. A person who has full cognitive function can still fall victim to excessive persuasion from a person they trust, leading them to act against their own self-interest.

  4. Situation

    The influencer will try to take advantage of the situation by establishing a relationship of dependency, which allows the influencer access to information needed to fraudulently gain funds. This may be a result of the influencer isolating their victim from a support network or taking advantage of them after significant/traumatic life events (such as a bereavement or hospitalisation).

In part two, we look at how you can mitigate some of the risks of undue influence and best serve your client throughout the process.

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