Professional Indemnity Insurance is Mandatory for IFAs
Every Independent Financial Advisor knows the importance of insurance – but how many take their own advice when it comes to adequate cover?
As an independent financial adviser (IFA), you are probably used to having conversations with customers about the how important it is to take out adequate insurance cover. After all, from builders to barristers, the right policy is essential, both to protect the individual and also to demonstrate to customers that this is a serious person who manages his business risks and is worth working with.
When it comes to IFAs taking out cover for themselves, however, it is often a case of the cobbler’s children being the worst shod. The Financial Conduct Authority (FCA) dictates that IFAs must carry adequate professional indemnity insurance, but in many cases, they find themselves taking out basic cover that barely meets the minimum requirements.
In part, this is due to difficulty in finding specialist financial advisers professional indemnity insurance, but in the current economic climate in particular, it is more important than ever for IFAs to consider the bespoke protection that this kind of policy brings. It really is a case of “physician, heal thyself.”
IFAs know better than most just how turbulent the current financial climate is. With some of the most high-profile pension funds in crisis, investments performing badly, government bonds trading in negative territory and the pound at a record low, now is not the easiest time to be giving out financial advice.
These problems have transmitted themselves along the chain, pushing up insurance premia and leading some IFAs struggling to find professional indemnity insurance at a competitive price.
What is covered?
As an IFA, there is always the possibility of a client taking out legal action against you in respect of the service you have provided and the advice you have given in the course of your professional activities.
We are all human, and everyone makes mistakes. Unfortunately, in the financial services business, bad advice can lead to significant losses and big-money lawsuits. These kinds of claims can, of course, be expensive and time consuming to defend. For a small business or a self-employed individual, a single claim of this nature can be enough to destroy the company.
Independent financial advisers professional indemnity insurance provides the protection you need against the specific risks that you face in the financial services industry. The policy will typically need to cover mistakes such as errors and omissions in the professional advice you give and other mistakes such as the unintentional breaking of non-disclosure agreements, breaches of copyright or loss of data or documents.
However, the real beauty of a specialist policy is that it can be specifically tailored to take into consideration the specific needs of your business.
Speak to an expert for peace of mind
The national and global economic circumstances mean that times are hard enough for everyone right now, but this is felt by those in the financial services sector more than most.
Give yourself a little peace of mind by knowing that if the worst happens, you have the cover in place to protect yourself and your business, and get some expert financial advice of your own today!