This week Advance Mortgage Funding, a member of the Primis Mortgage Network, was ordered to pay compensation to a client after an adviser at the firm wrongly stated that his client would not be liable for paying the additional stamp duty rate, a mistake which only came to light once it was too late to pull out of the deal.
Primis’s defence that the adviser was not actually offering tax advice was rejected by the Ombudsman, with the case adjudicator stating that “the broker gave the impression he was giving advice on stamp duty” and that if he wasn’t he should have made it clear to the clients “ that they needed to double check with their solicitor”.
Tax is taxing for a reason
Paul Flavin, managing director of Zing Mortgages, warned that increasing numbers of mortgage brokers are drifting away from their key skills of offering advice and recommendations on mortgage and protection products, to the “inherently complex world” of tax advice.
And while he argued that understanding when the additional rate is charged isn’t difficult on the surface, “is it our job to clarify?”.
Flavin continued: “Many a case we’ve had where clients claim that one solicitor says they don’t feel the additional charge is due while another is saying it definitely is. The same happens around transfers of equity and several other grey areas of ownership.”
Where does your advice start and end?
Nick Sherratt, managing director of Mojo Mortgages, said that when discussing a mortgage, it could be easy to fall into advising on tax and other aspects without either the knowledge or qualifications required.
He continued: “That can be dangerous for customers. You have to make sure you have a strong compliance and quality resource so that you can advise customers with confidence. It’s important to be clear about where your advice starts and ends ‒ CeMAP can only do so much.”
Recognise when specialist advice is needed
Flavin added that this is an extension of the situation that has sprung up in buy-to-let advice, with brokers taking on the responsibility for advising clients on whether they should purchase a property as an individual or as a limited company.
He said: “Accountants and solicitors work in specialised areas and have no problems in deferring to peers with more specialist knowledge. So why can’t brokers accept that the correct advice isn’t always what they’re convinced they know, but to defer and tell the client that they will need the tax implications and costs confirmed by an accountant or solicitor?”
Flavin emphasised it was time for advisers to “stop being a friend and font of all knowledge” to clients, and instead focus on what they do best, while building a solid network of experts they can refer clients to when appropriate.