Financial planners have described as “flawed” the compensation method for Australian financial services licensees that relies on professional indemnity (PI) insurance.

In a submission to the parliamentary joint committee inquiry into financial products and services, the Financial Planning Association of Australia (FPA) says PI cover is scarce and too expensive.

“The retail client compensation system has fundamental flaws and should be urgently reviewed through extensive public consultation with industry, consumers and stakeholders,” the association said.