Law firms are targeting financial planner litigation as a growth area, according to a senior specialist lawyer.
Wotton + Kearney partner Cain Jackson told a Money Management/Lawyers Weekly thought leadership breakfast yesterday (26 September) that financial planners represented the profession most vulnerable to litigation.
At the same time, Australian Securities and Investments Commission (ASIC) senior executive Louise Macaulay said the professional indemnity (PI) insurance taken out by financial planning firms needs to be seen as a risk management tool rather than a consumer protection mechanism.
Addressing the thought leadership breakfast, Macaulay reinforced the status of professional indemnity and the fact that there were some instances where PI insurance would not be adequate to compensate the number of consumers impacted.
She also noted ASIC’s recent survey of Australia’s top 50 dealer groups and the fact that a quarter of those firms required their representatives to hold their own cover.
“PI is a risk management tool and is not there for consumer protection,” Macaulay said “There is only a certain amount of compensation available if things go wrong and a lot of claims are made. PI will not always be capable of covering all claims.”
Elsewhere in her address, Macaulay acknowledged that some financial planners were experiencing difficulty in obtaining cover and said this pointed to claims experience and other factors that needed to be addressed by those seeking the cover.
Jackson said there was a growing realisation that financial planners were the most vulnerable profession with respect to PI claims because they were the most heavily regulated and exposed.
He said this was reflected by the number of law firms targeting financial services as the next area for litigation growth - and this was something that needed to be addressed.
Lawyers Weekly will provide further details of Jackson’s address, and the subsequent panel discussion featuring leading figures from the financial services sector next week.