The FMA’s decision not to impose a requirement for financial advisers to hold professional indemnity (PI) insurance has been welcomed by Financial Advice NZ.
When the regulator first floated the idea that PI would be an element of the standard conditions of having a FAP licence, the industry organisation was among those who raised concerns during the FMA’s consultation on standard licencing which ended 7 August.
The FMA announced on Friday 7 November that PI would not be a requirement of holding a FAP licence.
We advocated for professional indemnity insurance to be removed from the final standard conditions…
“We advocated for professional indemnity insurance to be removed from the final standard conditions for a number of reasons,” says Katrina Shanks, CEO of Financial Advice NZ.
“The main reasons were that the market was changing during times of uncertainty, and there were questions over its availability and affordability in the future.
“And so we advocated to have PI removed. We didn’t want it to prohibit people from being able to provide regulated financial advice.”
The FMA says professional indemnity insurance cover remains an important decision for each financial advice provider to consider, taking into account their own particular circumstances.
Shanks says: “We have a strong relationship with the FMA, we work quite collaboratively together and believe that when they do consultations that they are genuine consultations.
“So they have taken our concerns seriously. The FMA has listened to the market and made the decision to remove PI. We are very appreciative that they have listened to Financial Advice New Zealand.”
Nevertheless, Shanks is firm in her belief that all financial advisers should have PI insurance.
“We believe it is important that financial advisers do have professional indemnity insurance, and we have our own scheme with 500 members,” she says.
See our story FMA Rules Out Professional Indemnity Insurance.