Go beyond PI says Choice

Jo-Anne Bloch

Consumer advocacy group Choice is pushing both the Government and regulators to go further than professional indemnity insurance in terms of the obligations it wants imposed on financial planners and Australian Financial Services licence holders.

Choice wants the introduction of what it describes as a “compensation fund of last resort”, which it says is necessary to ensure that consumers who lose substantial sums are compensated.

Reacting to the release of a new regulatory guide by the Australian Securities and Investments Commission detailing compensation and insurance arrangements for AFS licensees, Choice spokesman Gordon Renouf said that even with the changes announced by the regulators, many consumers would face situations where their adviser had become insolvent and no insurance cover was available.

Further, he said that Choice was disappointed that licensees would not have to disclose the name of their professional indemnity insurer to consumers.

“Not knowing who the insurer is can delay or frustrate consumers’ efforts to obtain the compensation they are due where the financial adviser has gone out of business or absconded,” Renouf claimed.

For its part, the Financial Planning Association welcomed release of the ASIC regulatory guide with chief executive Jo-Anne Bloch saying it demonstrated an appreciation of the issues raised by the FPA and the complexities of the professional indemnity insurance market for financial planners.

She said the extension of the transition period over two years would greatly assist financial planners in sourcing appropriate professional indemnity cover.

Bloch said that ASIC’s decision to reduce professional indemnity cover requirements to equal company revenue would significantly reduce compliance costs while still providing adequate protection.