FAQ category: IFAs

Professional indemnity insurance is compulsory for all independent financial advisers and financial advisers that provide consumer and financial advice. If you provide purely corporate or professional investor advice, it may not be compulsory, but we’d still recommend it.

In recent years, we have seen an increase in claims, in part driven by social media and campaigns by some law firms, often referred to as ‘claims farmers’. These campaigns, previously focused on large investment providers, are now targeting companies of any size.

The Financial Conduct Authority has prescribed minimum thresholds which you’ll need to meet. The current minimum for professional indemnity is £1,850,000.

This can be complicated but insurers, and brokers, should be transparent about exclusions.

We will be able to advise but it’s worth knowing that some risks might be excluded, such as:

• Advice of defined benefit pension transfers.*
• Offshore investment advice.*
• Advice on tax mitigation products such as business relief, venture capital trusts and enterprise investment scheme investments.*
• Advice on unregulated collective investment schemes.*
• Advice on funds with a high allocation to property.*
• Advice on structured products.*
• Advice equity release.*
• Most policies will exclude claims in the USA and Canada and some insurers will restrict to UK claims only.
• More obvious exclusions are fraud, unless the fraud relates to an employee acting without consent or knowledge of directors and managers.

*We can source cover for advice in these areas, subject to disclosure and the associated details.

We can cover UK independent financial advisers or financial advisers of any size or specialism.

It is crucial that you understand your policy excess and how it can be applied in practice because excesses for independent financial advisers and financial advisers can be very high, with some starting at £5,000.

It can be complicated too but we can advise you.

Most excesses will apply to “each and every claimant”. This means that if you receive five simultaneous claims, your excess will apply to each claimant, leaving you with a total policy excess of £25,000.

It’s important you check and audit your advisers and ensure no mistakes are being repeated.