The Finance Brokers Association of Australia
(FBAA) is warning brokers about offering unqualified advice which isn’t covered by their Professional Indemnity (PI) insurance.
The FBAA has cited a recent case in which a broker was found to have breached his duty of care by the Credit Ombudsman Service and forced to pay more than $115,000. The Ombudsman claimed the broker had given incorrect and unqualified advice.
In addition, the client – who was forced to sell an investment property at a substantial loss – took the legal action against the broker.
The chief executive of the FBAA, Peter White
, says in this instance 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,” he said.
White is now urging brokers to educate themselves and update their knowledge of PI insurance.
"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.”
According to White, 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 in an endeavour 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. 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 pay out,” White said.