Financial advisers have been called on to do themselves and the industry a favour by driving ‘bad eggs’ out of the industry.
Speaking at a Sydney seminar yesterday QBE Insurance national underwriting manager, professional liability division, Adrian Gamble told those present that planners “bending the rules” were the primary drivers behind rising costs for obtaining professional indemnity insurance and that such people “had to go”.
Gamble says financial advisers would be helping themselves by identifying such people and assisting in having them removed from operating in the industry.
He says that while most financial advisers don’t give bad advice, those people who do are “real pests” who have ensured that for every dollar collected by companies providing professional indemnity insurance $1.45 is being expended meeting claims.
However on a positive note Gamble believes that as financial planning businesses move to become compliant under Financial Services Reform their risk exposures are likely to decrease and generate more favourable assessments by insurance providers.
Although Gamble cautions that to access lower professional indemnity premiums planners will have to demonstrate their houses are in order and that they have been actively working to reduce risk.
“Compliance is what we are looking for and its has to be active compliance,” he says.
On the broader issues facing financial planners, Gamble also cautions against businesses diversifying into other streams such as mortgage broking without first having done serious homework on the move.
He suggests that such businesses should be separated from a firm’s financial planning business because of implications in terms of compliance.
