Cool response to PI probe

A decision by parliamentary joint committee on corporations and financial services chair Bernie Ripoll to probe the adequacy of the $20 million professional indemnity (PI) cover cap for advisers has drawn a quick industry response.

Ripoll said the committee has seen a number of submissions to date that suggest the PI cap for advisers is inadequate at $20 million, and that this “needs to be investigated”.

Speaking at the Institute of Actuaries of Australia 2009 Biennial Conference in Sydney recently, Ripoll added that the committee would also investigate the impact of PI cover on adviser professionalism.

PI cover and what it will ultimately mean in terms of risk taking by advisers on behalf of their clients is at the back of my mind, he said.

Financial Planning Association (FPA) deputy chief executive Deen Sanders responded that the committee should consider “if in fact there’s a better mechanism than PI by which the industry is able to respond to consumer claims”.

“Rather than raise questions or concerns about whether the current PI arrangements satisfy the needs of consumers, the far bigger question that needs to be asked is whether PI is the appropriate strategy at all,” Sanders said.

Count Financial chairman Barry Lambert said PI cover, whether it is $20 million or $50 million, is never going to help clients when there are licensees out there, such as Storm Financial, that breach those limits.

“The real problem is not with the existence of PI cover or the size of the cap, but rather the licensing system, and that is what needs to be addressed by the committee.

“The real issue is who will receive [Australian Financial Services Licences] and how they will be allowed to operate,” Lambert said.