Will individual adviser registration change who pays for PI?

22 June 2020

Individual adviser registration may spell an end to licensees having to source professional indemnity (PI) insurance, according to the chair of Synchron, Michael Harrison.

Writing in a column to be published in Money Management, Harrison listed the provision of PI insurance as a function he foresees licensees will not perform, because he believes PI provision would be part of the adviser registration process.

“The functions I foresee that licensees will not perform, will be registering advisers (which they don’t technically do now anyway, the Australian Securities and Investments Commission does), monitoring the adviser’s behaviour in relation to the code (although they will still be responsible for ensuring compliance) and sourcing professional indemnity insurance (a welcome relief),” Harrison wrote.

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“However, licensees will also have to ensure that they remain relevant,” he said and noted that manner in which his own dealer group had been enhancing its software capabilities, increasing its staff training and adding resources to its compliance team.

“I think we will also have a larger role to play in helping to move the profession as a whole forward by offering advisers the kinds of services they need to cater for the disparate types of consumers in the marketplace,” Harrison said.

He said there seemed a likelihood that individual adviser registration would be likely to reduce regulatory costs simply by reducing the level of regulation.




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refreshing to hear at least 1 licensee not fighting the concept of individual licensing.

Harrison is a sensible bloke and I look forward to this piece.
The way for licensees to "remain relevant" is to have qualified people for a start.
If Management and Compliance people are less qualified than the Advisers they oversee, which is happening right now, what value do they add? None, I would suggest, which is why the AMP Licensees are so hopeless.

Probably a good outcome for all concerned. The one size fits all approach to bulk PI renewal generally sees some lower-risk businesses shouldering the burden for those that perform perceived higher risk functions (in the eyes of the insurer) such as stock picking. I know in our PI renewal each year they ask about 10 pages of questions to get a feel for our business, last year the cost of cover went down slightly. It still seems to hover around 2.5-3% of revenue.

Unless a capped liability can be agreed, shadow licensing will be required by PI insurers to ensure adequate compliance controls are in place and to aggregate risk. If the risk shifts, it shifts down to advisers arguably where it should sit, however the product Design & Distribution may take some of the burden. In any regard relevance is important than ever.

International Adviser magazine covering mostly British financial advisers earlier this year reported a 400% increase in PI premiums, even to those adviser groups who had no exposure to Defined Benefits clients and no PI insurance claims. The British adviser quoted was a speaker in November 2019 FPA Convention. I have drafted a report "Amendments to the ASIC ACT" sent to the Minister that explained 5 incidences of severe business grief, where one of most serious concerned the banning culture behaviour of ASIC instead of a rehabilitation. ASIC Banning action causes up to 5 degrees of subsequent higher severity, domino effects to AFSL licensees in caring for affected clients, which is utter madness, where the next PI renewal crisis is the 3rd domino to fall. After a banning action is concluded, ASIC lawyers strike up another black mark (statistic) to their credit and puts the file away (haha), but AFSL licensees who do not abandon affected clients are enforced to endure domino severities in business management crises. Rehabilitation and holistic redress as a Best Interest Duty of affected clients (contained in section 961 of the Corporations Act 2001 (Cth) requires advisors to act in the best interests of their retail clients) should be holistically supported by ASIC in the first instance and if the advisers, and if banking executives and corporate lawyers in financial institutions refuse rehabilitation counselling and redress direct to affected clients, then wrong doers should then agree to be banned. ASIC ACT Amendments should reinforce the performance of Section 961 of the Corporations ACT in effective rehabilitation in support of Predictive Trust under the Assurance Theory of Testimony, Positivism Research Philosophy in Information Efficiency, acting towards cognitive Domestic Governance, that should counter the deepening PI Insurer crisis by underwriters in London for the Australian financial services industry. Banning cripples Predictive Trust for consumers and PI underwriters. "Moving the deck chairs on the Titanic" PI insurance to adviser's sole responsibility appears to treat a symptom, but not the cause of this Titanic pandemic.

Individual PII coverage will skyrocket unless a group policy can be negotiated, such as accountants had at one time. The way that works is that a professional body (dare I suggest FPA) arranges for all its members to be covered, with a cap on liability, and the premium becomes part of the annual membership fees. Currently PI insurers all have a minimum premium of $10,000. Imagine what that cost would do to individual advisers. I can. I'm self licensed.

A lot of individually licenced Advisers are in for a huge shock when they discover they are unable to access PI cover. This is the nightmare scenario that the FPA are not talking about.

I don't get why we would still have all these different licensees and consultants advising on compliance based on the their own interpretations. Wouldn't it be better and more cost effective if all compliance was uniform, with the same interpretation and same templates? It would be run by the same industry body that looks after adviser registration, whom also looks after compliance standards. Surely its easier for ASIC to communicate to one industry body for what they want as compliance, rather then hundreds of individuals licensees and consultants.

ASIC should access bulk PI covers for all advisers in Australia. Advisers then pay ASIC their fees pro-rata through ASIC Regulatory Levy.

the so called research by AFSL is a joke you have AMP as your licensee they put a majority of AMP products on their APL same goes for IOOF and other AFSLs that create financial products. Second this so called investment research is a joke so many AFSL had CDO and MBS related products and tree plantations on their APL they even kept them on there when it was evident that those products were failing horribly

I don’t see any value in my previous AFSL that’s why I have got my own license now, I applaud this approach of individual registration AFSL serve no purpose for advisors.

Just have a central registry which could be run by the disciplinary body to check your qualifications, FASEA exam passed, any misconduct committed by you in
the past or any banning orders by ASIC. Then we as planners can just buy PI for ourselves and our practice just like dozens of other professionals do doctors, lawyers, tax agents, accountants etc if they can afford it why can’t we.

There has been numerous cases of AFSL taking on planners who couldn’t even pass simple tests to check their RG146 knowledge, who have committed misconduct, been de authorised by other AFSL, but yet these AFSL still took them on why well because they had a big book and would bring the AFSL lots of money.

So please stop this BS argument that AFSL are needed to protect clients, to provide PI, to support advisers there is no need for them at all they just add another layer of cost for us and they serve their own interests not the advisers and not the clients ABOLISH AFSL FOR ADVISORS

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