Brokers should educate consumers
By
Kevin Eddy
|
31/08/2010 5:20:00 AM
|
6
comments
Brokers may be putting themselves at risk if they do not enquire about clients' spending patterns.
David Hayward, managing director of money management firm The Money Institute, told Broker News that brokers may not be fulfilling their duties under responsible lending requirements if they simply carry out credit assessments in a 'tick-box' fashion. Instead, he argued that brokers have a responsibility to help clients manage debt more effectively – especially in terms of spending behaviour.
"Reducing a credit card debt to ensure a client can meet serviceability requirements and so qualify for a loan is a common practice," said Hayward. "However, if the client simply reinstates the card after the approval and then spends accordingly, the broker could be faced with implications if the impact of effective personal debt management is not discussed based on clients' past behavioural patterns."
Hayward, a former broker and bank executive, added that doing so not only helps mitigate risks if clients run into financial problems, but also helps teach good financial behaviour and literacy, as well as creating a deeper relationship with customers by offering regular financial health checks.
He also acknowledged that there is a "fine line" between offering general advice and financial planner-style personal advice, but suggested that the advice role of brokers will become more important in the future.
"I think the roles of brokers and financial planners will become much closer over the next five years as licensing develops - potentially to the point where we see a new type of 'super-broker', who does both, become much more common," he commented.
Hayward's Money Institute runs the Live Debt Free project, which runs a number of programmes educating consumers on effective budgeting and financial literacy.
Related stories:
Wealth Today spruiks advice potential
Latest Comments
Total:
6
comment(s)
Country broker on
31 Aug 2010 09:53 AM
Good advice, inquiring about spending patterns is NOT necessarily financial advice it is part of getting to know who the client is and being able to recommend a product that is not unsuitable. that includes understanding spending patters=ns and saving patterns.
What worries me is the irresponsible setting of credit limits by the banks and other lenders on credit cards hopefully when the NCCP comes into full force it will help to stop the predatory behaviour by the banks and other credit card issuers.
Dealing with first home buyers who have credit card limits above $10,000 is not uncommon for me, it is not needed and really irresponsible.
Broker on
31 Aug 2010 10:21 AM
I’m sorry, but I’m a Broker, not a Nanny, how my clients choose what and how much to spend their money on is really not my business!
This is what credit assessment areas are for, is it not?
dolly on
31 Aug 2010 11:12 AM
It is the Credit Assessors area however it''s a bit difficult to fully assess a deal when a Broker has not stated the correct credit card limits of a Borrower or their personal loan that is listed on their credit report but they "didn''t take up". The Broker has a responsibility to the customer to ensure they are not over extending themselves.
Broker on
31 Aug 2010 11:54 AM
Yes Dolly I agree, however the customer also has the same resonsibility, and more so than us, as they know their exact financial situation better than I ever will.
If they don''t declare a liability , how are we to know?
Spinner on
31 Aug 2010 08:36 PM
Not much a broker can do after they have the loan. These are grown up people who are responsible adults.
Dave on
01 Sep 2010 11:22 AM
So bank employee''s don''t need to do this? I think most people are responsible however it''s the one''s who aren''t who do not wish to take responsibility, I didn''t force them to reinstate the card that was their decision. Licensing will not mitigate every factor and I am in the business of helping people acquire debt not showing them how to budget or spend their money that is the individual''s job. I have enough to do stop looking to me as your scape goat!.