Chambers Investment Planners Pty Ltd, which holds AFSL No. 243359, entered into administration on 2 July, with Grant Thornton appointed administrator, according to an ASIC insolvency notice.
ifa understands the company’s decision to enter voluntary administration is largely in relation to a dispute with its PI insurer over coverage of expenses emanating from a claim brought by a client before the Financial Ombudsman’s Service (FOS).
“In this case, the insurers decided to calculate the costs relating to the FOS claim in a particular way that [Chambers Investment Planners Pty Ltd] disputes,” a source close to the matter told ifa, speaking on condition of anonymity.
“If a client brings a claim against an AFSL before the courts and is awarded $500,000 in damages their PI insurer will cover the full amount plus costs minus excess,” the source said.
“But in the case of a FOS claim, if the same amount was awarded, the insurer will only cover up to around $100,000 and the licence holder will find themselves out of pocket for the rest.
“This is very serious and the marketplace is not sufficiently aware; it has huge ramifications and could turn the whole market upside down.”
This gap in PI coverage for FOS claims is partly due to FOS’s decision to split claims into various categories with a claim ceiling price for each, the source said.
In a separate matter, a claim for discovery – i.e. access to documents required to pursue litigation before the courts – was brought against the company in 2011, but dismissed by the Federal Court.
Do any of you making these comments even know this adviser and company?
SAM, you are so right its scary.
Every adviser has his/her assets on the table for greedy lawyers or FOS to distribute how they see fit. If your one of these “I do the right thing so im safe” advisers, well think again. I have seen many FOS rulings to the industry and they are brutal and in the main completely unfair. The big bad adviser loses every time with no appeal. Now PI insurers will wriggle out of cover. Good luck boys n girls you will need it!! You will lose every time or burn your assets fighting it. Wonder if its too late to do that apprenticeship i should of done…..hmmm
‘Steps to being a good financial adviser
1. Don’t have any assets in your own name
6. Complete the SOA will a long list of disclaimers
‘
Understand your view. But how are you ever going to get the SMSF market? Where you are generally dealing with folks that can read and understand the disclaimers, and then work out that they are paying for very little.
If you disclaim everything then what is the punter paying for, a friendly shoulder to cry on?
WOW….Another reason for SMSF’s to drop the use of Adviser’s
Gerry is right. ASICs business model is for AFSLs to be big, despite what they say. Yes the insto owned AFSLs do write big cheques because of neg advice, but funnily enough the adviser still gets to pay his excess without the opportunity to defend the case in court.
The other reason is simple-ASIC can waive its big stick ( enforceable undertakings) with greater publicity impact ( lots of heads on poles ) when the AFSL has over 1000 advisers (eg Westpac, AMP, CBA )on its books.
Vertical integration is ( apparently )something only advisers worry about, despite the CBA fiasco ( and others ) and the ” no-ethics ” sales force mentality of large organizations
Steps to being a good financial adviser
1. Don’t have any assets in your own name
2. Only join a licensee that has lots of assets (Bank)
3.. Find a good PI Insurer (if anyone exists)
4. Don’t let Licensee move liabilities to the adviser via the adviser agreements.
5. Do a SHORT SOA to make sure the client understands the investment risk and any advice
6. Complete the SOA will a long list of disclaimers
7. Make the client wear your costs
8. find a nice insolvency expert and get some advice early
Do they have a course on this at the FPA,AFA or Kaplan? must be in last months CPD or is it a FOFA reg?
‘ifa understands the companys decision to enter voluntary administration is largely in relation to a dispute with its PI insurer over coverage of expenses emanating from a claim brought by a client before the Financial Ombudsmans Service (FOS).’
IFA understands – hm…..
Is this stirring the pot or are there some hard facts here.
What was the damage done to the client? One assumes rather large? If the advisers were out of order then who should pay the compensation?
What else was gong on with this mob – sounds as if there is more to it than just this aspect.
would be nice to know the name of the insurer –
evidently not all things are equal in the market place.
And what about the advisers who have to confront a kangaroo court where there is no right of appeal, even rapists and murderers get that right, but licensee’s and advisers don’t.
Makes you wonder, a system requires AFSLs to have PI to a substantial level, but also be a member of a resolution service such as FOS. If this is correct, the system then results in a cap on the amount of PI cover for a claim, due to FOS (the organisation meant to help settle the customers loss). Once again the consumer is left high and dry by a regulatory setup that time and again fails both customers and advisers!
SAM, what about the poor client who proberly had to go thru an extended period of stress wondering where his/her life savings had gone.
And now you can see why ASIC would prefer firms are licensed by cashed up banks. It’s about compensation.
Poor Bastard! Went under because the PI insurer wouldnt cover him. I wonder how many other Advisers are going to be left out in the cold by their PI Insurer?