Brokers have their say on “suitability” of advice

Brokers have their say on “suitability” of advice


Bridging and Commercial’s article on Thursday regarding responsibility of advice provoked a lot of debate from advisers keen to have their voice heard on the matter. Below is the response from IFA Dermot Brannigan, which raises many interesting points on the matter. 

“I read with interest, the article entitled 'How far should you be held responsible for the advice you gave?'

The issue of the responsibility of the consumer is spot-on. It could be argued that subsequent borrowing has put consumers in the position that they cannot afford their mortgage payments, and yet you can hardly blame the broker post-sale. Secondly, if you have made a client aware of all the potential risks and downsides of their action, are brokers still complicit purely as they have 'arranged' the loan. What about the lender's responsibility?

There was a case recently of a broker who was fined £10,000 for arranging fast-track and self-cert deals with a clients signed declaration that they could afford the loan. The FSA said that as he didn't have evidence of income on file, he was at risk of fraud being committed because he just took his clients word. The part I find most interesting is that there is no evidence that the lender who lent the money has been fined.

The FSA is therefore saying that by helping the client apply for the loan, you are more responsible for the conduct of that loan, than you are if you actually lent the money.

By definition, the man who tells a teenager where to buy a weapon that is subsequently used in a murder is guiltier than the shopkeeper who sold the weapon.

What I find very worrying about this particular broker is that presumably the FSA wanted to see income on file (which may or may not have proved affordability) and then hung the broker as his file clearly shows that the client cannot afford the loan. Yet self-cert/fast-track lending is still authorised by the FSA. What we also haven't been told, in this story, is whether or not these clients have indeed fallen into arrears with their mortgage.

Of course we don't have the answer to the question of whether a broker is responsible if they have actively encouraged their client NOT to borrow money, and yet the client has insisted the broker arrange the loan. Who carries the responsibility then?

From all this latest FSA action, I am left wondering is whether these brokers record keeping was poor and so there wasn't enough evidence to defend them.”

What do you think? Agree, disagree? We always want to hear your point of view so let us know by writing to [email protected]


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