Industry infighting has damaged the reputation of financial advice and made it appear the financial services sector is blame shifting instead of placing consumer interests first.
Financial Ombudsman Service (FOS) chief ombudsman Shane Tregillis said the focus on internal industry debates sent negative messages to consumers at a period of low confidence in financial planning advice.
“It seems to me that a continued focus in such internal industry debates about whether it is the fund manager, rating agencies, PI insurers, advisers or regulators who should be held accountable when things go wrong…only serves to reinforce the narrative of an industry that appears to want to put the blame on someone else rather than truly putting the interests of the customer front and centre,” Tregillis said.
Speaking at the Money Management PI Insurance breakfast in Sydney this morning Tregillis said FOS would not be seeking additional laws around PI but saw the need for a last resort compensation scheme.
He said PI insurance was currently limited in its usefulness when licensees went into administration or insolvency as funds may not meet the the level of claims and conduct causing claims was often not covered by the PI insurance.
Tregillis said a last resort compensation scheme could be implemented at low cost across the industry but would not be a catch all solution but only used when PI insurance was not sufficient to meet claims against an advice licensee.
He said a last resort scheme was a fairer solution than a unilateral premium level increase across the sector or placing smaller and non-aligned planning groups in risk categories not applicable to larger groups who can self insure.
He said FOS was concerned with the high number of determinations that have remained unpaid from a small group of licensee and would continue to work with the advice sector, ASIC and government to ensure the development of the scheme.
