Brokers are being cautioned about offering unqualified advice that isn’t covered by their professional indemnity insurance after one client successfully took legal action against their mortgage broker.
The Finance Brokers Association of Australia (FBAA) said a recent case in which a broker was found to have breached his duty of care ended up costing the finance broker more than $115,000.
The FBAA said the broker was found by the Credit Ombudsman Service to have given incorrect and unqualified advice. The client was forced to sell an investment property at a substantial loss and took legal action against the broker.
FBAA chief Peter White said the broker went outside the bounds of his role by providing property advice and acting as a real estate agent when he did not have a licence to do so.
"This should serve as a warning to brokers. If you give unqualified advice, your professional indemnity insurance won’t cover you,” Mr White said.
The FBAA runs financial education seminars and workshops that deal with these issues, he said.
"I would plead for any broker who may have let their education slide to update their knowledge on the rights and wrongs when it comes to advice and insurance.”
The FBAA boss said unqualified advice is potentially a growing problem as the line between financial planners and real estate property sales and other arms of the broking industry become blurred as people seek to diversify revenue streams.
“If you are only a qualified finance broker, act as a broker and do your best to meet your client’s needs,” Mr White said.
“If you also want to assist a client in other areas like property purchasing, get the necessary qualifications and training, otherwise you may be at risk of a life-changing personal payout.”
[Related: Banking hoax a warning to brokers]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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