To start, there are concerns about whether pre-existing insurance policies will cover planners once the Tax Agent Services Act (TASA) comes into force on July 1 2013, particularly if their service offering doesn’t change.
“If [planners are] going to start doing tax returns ... then that’s a completely different service offering and a different level of coverage ... if they’re doing what they are doing today [after] TASA starts, how is the risk any different to the PI provider?” said Dante De Gori, general manager of policy and standards at the Financial Planning Association (FPA).
“Arguably, we would say that financial planners are already covered for [tax] advice within the context of financial advice. We’d be disappointed if our providers came out and said that wasn’t the case.”
Although he admits there’s been no indication of any “drastic” changes, Mr De Gori said it’s an issue that the FPA is watching.
Phil Anderson, chief operating officer at the Association of Financial Advisers (AFA), said although it is most likely that existing cover will be adequate, “it’s another factor that might highlight to insurers that there’s a greater risk, a greater exposure”.
“If it’s covered under the existing policies, then presumably it will have limited impact immediately on cost, but it does open up a new avenue of complaint by a client to go through the Tax Practitioners Board,” Mr Anderson said.
In addition, there are concerns the FOFA reforms will have a negative impact on PI insurance, with some boutique advisers suggesting PI underwriters are already “pricing out the risk” they are taking on, particularly in relation to best interest.
Speaking more broadly, Brad Fox, chief executive officer at the AFA, said when a level of regulation increases, the number of duties an adviser has to meet increases too. “The more things there are to meet, the more risk there is potentially of failure,” he said.
