Industry funds urge strengthening of advice PII regime

Mike Taylor

Managing Editor/Publisher, Financial Newswire

17 February 2026

Major industry funds group, Super Members Council (SMC), has thrown its support behind giving the Compensation Scheme of Last Resort (CSLR) the ability to access the Professional Indemnity Insurance cover of insolvent advice licensees.

The SMC has responded to Treasury consultation on enhancing the effectiveness of PII arguing that it should be strengthened to encompass principles similar to the superannuation funds’ Operational Risk Financial Reserve (ORFR).

The SMC has also strongly reinforced its view that superannuation funds should not be made to carry the cost burden of funding the CSLR.

It said extending similar principles to PII for relevant licensees, such as through tighter minimum coverage limits, reduced excesses, and clearer fraud exclusions would ensure perpetrators bear primary responsibility while preserving CSLR reserves for exceptional cases.

“Well-designed PII is one part of an improved system of accountability and consumer protections. It shapes incentives to manage risk, determines who ultimately bears the cost of failure and affects whether the group can withstand major advice-related losses without defaulting to members or the CSLR,” the SMC submission said.

“While enhanced PII requirements represent a vital lever to protect consumers and stabilise the CSLR, they are not a substitute for upstream prevention,” it said. “Gaps in the existing regulatory architecture, including inconsistent enforcement of licensee obligations under ASIC’s RG 234, limited proactive risk monitoring, and inadequate oversight of high‑pressure or conflicted sales practices, continue to permit consumer harm.”

“Without reforms to existing anti‑hawking provisions, conflicted remuneration prohibitions, licensing frameworks for platforms providers and early‑intervention mechanisms, these weaknesses will continue to drive PII claims and premiums upward.

“In the absence of a more consistent and preventive approach, PII may become prohibitively expensive for compliant firms, reducing the availability and accessibility of quality financial advice for consumers,” the SMC submission said.

“SMC notes that any increase in regulatory requirements or obligations relating to PII is likely to lead to premium repricing and potentially higher costs across the market. Such changes could shift the distribution of the cost burden among different segments of the financial services industry. It is essential that any significant adjustments to PII settings be informed by robust consultation and supported by modelling to understand how changes in premiums and availability may affect all insured entities across the financial services sector.”

“Further, and in line with PII being the first line of defence, SMC also reiterates its previous calls to Government to explicitly rule out any extension of CSLR levies to APRA‑regulated super trustees. These funds already meet dedicated compensation and remediation costs through fund reserves including their required ORFR and have no history of CSLR claims,” the submission said.