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Source:  Broker News - www.brokernews.com.au

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.