Fertile ground for claims against advisers

financial-services-sector/compliance/financial-planning/funds-management/research-and-ratings/financial-advice/financial-services-industry/financial-advisers/FOFA/global-financial-crisis/

9 September 2013
| By Milana Pokrajac |
image
image
expand image

Australia's growing "class action mentality" and the emergence of litigation funders have created fertile ground for claims against participants in the financial services sector, says law firm partner Geoff Connellan.

Law firm Moray & Agnew Lawyers surveyed over 150 professional indemnity (PI) insurance professionals, advisers, brokers and service providers earlier this month, finding almost half the respondents expected companies and/or directors would seek greater protection to guard against class actions and many (20 per cent) forecast greater restrictions would be imposed on terms.

Moray & Agnew partner Geoff Connellan said Australia's growing class action mentality — in addition to the lingering aftermath of the global financial crisis and the emergence of litigation funders — had created "fertile ground" for claims against participants in the financial services sector.

"While litigation funders play an important role — particularly by assembling smaller claims which would not be economically viable to pursue individually — they are also prompting companies and directors alike to seek greater protection," says Connellan.

"Financial advisers and dealer groups are at risk, with 34.85 per cent of our respondents predicting that profession will experience the highest level of claims activity in the next 24 months."

The survey also found 12 per cent believed the reforms would actually squeeze small and independent players out of the market. Only one in 10 said Future of Financial Advice (FOFA) reforms would help the industry regulator weed out rogue traders.

"The financial services industry formed the view early on that FOFA would push up the cost of financial advice, so in that respect these results are not surprising," Connellan said.

"However, if the objective of the reforms was to provide further protection for consumers, the industry is dubious that outcome will be achieved."

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months 2 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months 3 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 3 weeks ago

ASIC has suspended the Australian Financial Services Licence of a Melbourne-based financial advice firm....

1 week 1 day ago

The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered....

2 weeks ago

ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test....

2 weeks 5 days ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND