Advisory Services Are Growing - Is Your PI Policy Keeping Up?

The role of the Australian accounting firm has changed significantly over the past decade. Where practices once focused primarily on compliance work - tax returns, BAS preparation, financial statements - many now provide a broad range of advisory services: business structuring, investment advice, SMSF strategies, management consulting, and more.

This evolution is good for clients and good for firm revenues. But it also creates a risk management challenge that many firms have not yet addressed: does your professional indemnity insurance actually cover the advisory work you are providing?

Why Advisory Services Carry Higher PI Risk

Advisory work - by its nature - involves a higher degree of professional judgment than compliance work. A tax return error is typically measurable and straightforward to assess. The consequences of business advice that turns out to be wrong can be far more difficult to quantify, and the value of the advice itself makes it more likely that a dissatisfied client will pursue a claim.

Regulators and professional bodies have noted the growing exposure that advisory services create for accounting firms. The combination of rising client expectations, increasing complexity of advice, and a more litigious environment means that PI claims against accounting professionals are not declining.

The Gap in Generic PI Policies

Most standard professional indemnity policies are written for a broad market of professional service providers. While they may provide adequate cover for traditional compliance work, they frequently include limitations or exclusions that apply to higher-risk advisory activities.

Common gaps include:

•   Exclusions or sub-limits for financialplanning-adjacent advice

•   Restrictions on cover for advice related to investment structures

•   Limitations on SMSF-related work beyond basic audit functions

•   Exclusions for advice where the firm did not hold a specific licence or authorisation

If your firm's services have grown to include advisory work, it is worth reviewing whether your current policy actually covers it - before a claim arises.

What a Specialist Policy Looks Like

A professional indemnity policy designed specifically for accounting and advisory firms takes a different approach. Rather than applying generic professional services language and carving out exceptions, a specialist policy is structured around the risk profile of accounting work - including the advisory services that modern firms provide.

This means cover that reflects:

•   The range of compliance and advisory services your firm provides

•   The regulatory environment in which you operate,including TPB and ASIC requirements

•   The higher-risk nature of certain advisory activities,with appropriate policy structuring

•   The ability to update cover as your firm's services evolve

Reviewing Your Cover

If your firm has expanded into advisory services since you last reviewed your PI policy, the review is overdue. The right time to identify a coverage gap is not during a claim - it is now, at renewal, when adjustment scan be made without time pressure.

A specialist broker with experience in the accounting sector can assess your firm's current services against your existing policy and identify any material gaps. This is a straightforward process and should be part of your annual risk management review.

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