Accountants looking to take out a limited Australian financial services licence (AFSL) to allow them to continue to service the SMSF sector are finding it difficult to put appropriately priced professional indemnity (PI) insurance cover in place for their practices, according to an expert service provider in the space.
“Where I hope the industry will catch up, and something I’m struggling with, is when I sit down with my PI insurer every year is that they have never understood the concept of providing pure strategic advice,” SMSF Partners director David Mardell told delegates at the recent NowInfinity Conference in Hawaii.
“Last year we had 18 accountants who are CAs (chartered accountants) or CPAs (certified practising accountants) who just did strategy work, they didn’t do any work with investment products, whose insurers just couldn’t get their pricing structures around those practice models.”
Mardell said the problem stemmed from the perception the insurers had about SMSFs.
“They’re still viewing SMSFs from a product perspective and pricing PI cover accordingly,” he said.
He admitted he was hearing anecdotal evidence PI cover was beginning to come down in price, but there was a way to go because traditionally insurers and the Australian Securities and Investments Commission (ASIC) still recognised and favoured the financial planning dealer group model as the standard and more familiar business model.
“ASIC likes dealer groups because they can train and supervise their advisers and give their authorised representatives some clients, support materials and compliance policies,” he said.
A further challenge facing accountants looking to take out any type of AFSL would be finding a balance between satisfying their requirements as a licensee and continuing to service their clients in an efficient manner, he said.
