FPA urges states to solve PI crisis
By George Liondis
TheFinancial Planning Association (FPA) is approaching state Government’s throughout Australia with a string of proposals in an attempt to find a legislative solution to the worsening crisis over professional indemnity insurance for financial planners.
The proposals include a plan, which would require the backing of state legislation, to impose a statute of limitations on the advice given by financial planners.
The statute would limit to a fixed term the time frame in which investors can make a claim in regards to advice they receive from a financial planner.
The chief executive of the FPA, Ken Breakspear, has confirmed the association has already approached the New South Wales treasurer, Michael Egan, with the proposal.
Breakspear says the association would look to consult with other state treasurers before deciding whether to adopt the proposal as official policy.
Breakspear has also confirmed that the FPA is exploring the potentially controversial proposal of establishing proportional liability for the advice given by financial planners.
The proposal would push some of the liability for the advice given on any investment products by financial planners back on to the providers of those products.
Also being considered by the FPA are options stemming from the NSW Professional Standards Act 1994. The Act limits the professional liability of members of professional associations in some industries.
The FPA has commissioned legal advice to examine whether the Act can apply to financial planners who are members of the FPA, although such a solution is likely to provide relief from the professional indemnity crisis only for planners in NSW.
Breakspear says the proposals are directed at creating a level of certainty about the financial planning industry among insurers, who have deserted the professional indemnity insurance market over the last year.
According to the FPA, of the 37 providers who were willing to offer professional indemnity cover to financial planners last year, only four — QBE, Dexta, AIG and Macquarie Underwriters — remain, resulting in vastly escalating premiums for financial advisers.
In one case recently uncovered by the FPA, a financial planner who had previously paid $1,800 for professional indemnity cover, was quoted a premium of $80,000 when trying to renew their cover this year. The adviser was eventually covered by another insurer for $35,000.
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