Lines between brokers, financial planners to blur

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By Adam Smith | April 27, 2011 10:09 AM EST

A leading training group has weighed into the debate over brokers offering financial advice, saying brokers could draw regulatory attention by advising clients on investment properties.

AAMC Training Group Managing Director Jeff Mazzini has told Australian BrokerNews brokers could find themselves crossing boundaries if they advise clients how to use their home loan.

"A broker must make it clear to the clients that his role is only to provide the best loan product that meets the client's needs and not advise past that point. Should a broker then advise clients what is the best thing to do with the loan monies then he would certainly draw regulatory attention," Mazzini said. "I sit on the State administration tribunal and hear cases against brokers and quite often the issues have arisen once the broker has advised clients to invest in products or services that they are not licensed to, [such as] investment property."

Mazzini has predicted, however, that the line between financial planning and mortgage broking will become increasingly blurred as regulation comes into effect.

"It's already happening now as more financial planners, real estate [agents] and accountants are adding credit advice to their service offerings," he remarked.

In light of this, Mazzini has advised brokers to position themselves to offer financial advice so "they can value add to their clients and be in a very strong position to offer fee for service model". To do this, Mazzini said brokers will either need to secure further qualifications or allign themselves with companies offering a holistic range of financial services. While some brokers may choose to hold both an ACL and AFSL, Mazzini said, others could serve as credit reps under companies which hold both licenses.

"They might not choose to have their own license but they should at least be looking to be authorized representatives under respective license holders so they can be authorised to advise across various areas," Mazzini commented.

"Many say they do  not want to have to do that work, they do not have time, but it's just about being qualified to talk the talk, gather the information and having great back office services to undertake all the work and prepare required information for the clients," he added.

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