TheAssociation of Independently Owned Financial Planners (AIOFP) has negotiated a deal with insurance group AIG to offer its members significantly discounted professional indemnity (PI) cover.
AIOFP sources close toMoney Managementsay a deal has been struck resulting in member dealer groups gaining PI cover for 1.5 per cent of gross revenue, with the likelihood of premiums falling to as little as 1 per cent for firms with lower risk profiles.
AIOFP chief executive Peter Johnston, however, while acknowledging an agreement has been reached, is unable to confirm the insurer involved or the offer rate due to “commercial sensitivities”, but does say that the group struck “a good deal”.
Given the market average for PI cover is 2.5 per cent, the AIG deal will save a firm with a $5 million turnover at least $50,000 in premium costs per annum, and at best $75,000.
“We have a member who’s paying 4 per cent and he’s got a $1 million turnover, so he’s paying $40,000 and we can get that for him now for much less.
“We also have a member in Western Australia who was the first in and he’s made a $20,000 saving,” Johnston says.
Despite there being a flat rate offered to all member groups, dealers will be assessed individually and rates will vary.
“We will have straight rates across the top and discounts for size and groups that have their people all under one roof, which lowers risk given the greater control of what goes out the door for these groups,” Johnston says.
He adds one factor impressing the underwriter (AIG) was most independently owned groups are small businesses operated by directors who have their house on the line and therefore are very careful about any advice given to investors.
“Whereas if you’re an adviser working for a bank and you give shoddy advice, then the bank can get over it,” he says.
AIOFP has 48 member firms representing more than 600 advisers and $4.3 billion in funds under advice.
“One of the two major reasons we went down this road was firstly we never thought the FPA could pull it off,” Johnston says.
“And secondly, from an informed source on theFPAboard, the board has vetoed a move towards internal self-insurance because the institutions don’t believe it’s in their best interest for the independently owned groups to get assistance.”
