Having surveyed 156 senior professional indemnity and D&O (directors and officers) insurers, brokers and advisers at the Australian Professional Indemnity Group annual conference in Sydney last week, Moray & Agnew found a range of views about FOFA’s effectiveness.
While almost one quarter of respondents (22.73 per cent) believe FOFA will lead to better practices and result in fewer professional indemnity insurance claims, only 9.09 per cent of respondents consider that the reforms will “help ASIC weed out rogue traders”.
“If the objective of the reforms was to provide further protection for consumers, the industry is dubious that outcome will be achieved,” said Moray & Agnew partner Geoff Connellan.
Furthermore, 12.88 per cent of respondents indicated they believe the new regulatory environment will “squeeze small and independent players out of the market”, while one in five (18.94 per cent) expect the cost of financial advice to increase under FOFA and more than one third (37.88 per cent) expect PI insurance premiums to increase, 15 per cent of whom expect rises of more than 20 per cent.
“The financial services industry formed the view early on that FOFA would push up the cost pf financial advice so in that respect these results are not surprising,” Mr Connelan said.
when will the ISN rogues be even looked at ?
Of course FOFA won’t be effective. It is just adding rules and administration that diligent reputable advisers need to follow. Rogues by definition aren’t sticking to the existing rules, and they’ll ignore these new ones as well. FOFA is about being seen to be doing something rather than making substantive changes and addressing the structural issues within the industry. This doesn’t mean that its all bad, it just means that on the whole it will be costly and ineffective.