The Insurance Council of Australia (ICA) has weighed into the financial planners debate, calling on the Federal Government to establish a compensation fund to help clients who have received poor advice.

In its submission to the parliamentary joint committee inquiry into financial products and services, ICA says it is important that professional indemnity (PI) insurance is not seen as a guarantee that compensation will be given to people suffering a financial loss.

“If the Government’s policy goal is to enable consumers to receive in all cases the compensation they are awarded, then the Government needs to consider establishing a compensation fund,” the submission said.

ICA says a misconception exists among financial planners that PI insurance is designed to enable compensation to be paid to third parties, when it is actually intended to protect the financial wellbeing of the adviser.

It says the availability of PI insurance for financial advisers is already becoming more difficult to obtain. Premiums are increasing and some insurers have withdrawn from the market altogether.