SMSF professionals face licensing, insurance holds ups
Applications for an Australian Financial Services Licence are facing headwinds as applicants struggle to secure professional indemnity insurance.
The insurance market has hardened following the royal commission, according to head of licensing at The Fold Legal, Sonia Cruz.
This poses a serious hurdle for new AFSL applicants, who must prove they have arrangements in place for compensating clients for losses suffered as a result of a breach by the licensee or its representatives.
Further, accountants and advisers can find themselves facing headaches at the point of annual renewal.
This situation could apply to those holding a limited licence as well as a full AFSL, according to Ms Cruz.
“The PI insurance obligation applies to all AFS licensees dealing with retail clients so yes this does apply to advisers providing SMSF advice and licensees operating under a limited AFS licence,” she told SMSF Adviser.
For Ms Cruz, there are steps an adviser or accountant can take to mitigate their risks:
- Start looking for insurance early.
- Find a broker who specialises in PI insurance.
- Know your PI insurance needs, because not all services require PI insurance.
- In your licence application, be clear about the business and services you will be providing.