Insurance for Financial Advisers
Financial advisers insurance with a difference. We offer unique and specialist claims handling, with our own in-house compliance experts.
What you need to know about insurance for financial advisers
We know that the insurance market for financial advisers has been challenging for a number of years.
The professional indemnity insurance market for financial advisers is currently restricted to only a handful of insurers which is why we work closely with two specialist insurers with experience insuring financial advisers.
We know experience and continuity are incredibly important, particularly when it comes to complex and sensitive insurance matters. It’s this expertise that helps us obtain competitive solutions for our clients.
We don’t just arrange insurance for financial advsiers – our expertise in the sector allows us to work as consultants to our clients too. We understand that elements of your work, like high risk investment vehicles or defined benefit pension transfer advice, can impact your professional indemnity so we work closely with clients and professional indemnity insurers to provide guidance on the implications of higher risk work.
As a financial adviser, you need to be aware of the minimum levels of insurance required by the Financial Conduct Authority (FCA) and Insurance Mediation Directive (IMD). It is also important to have an awareness of the professional indemnity excess applicable and its implication on capital adequacy.
Insurance for defined benefit transfer advice
We are one of only a few brokers in the UK able to source professional indemnity insurance for defined benefit transfer advice.
We know there are challenges in this area and recent market dynamics, particularly the bond market yields and prices, have in theory reduced the likelihood of upheld complaints.
Our partner insurers will cover defined benefit transfer advice and we help to explain the risk and processes you followed in providing such advice.
Frequently Asked Questions
Financial advisers
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.
Professional indemnity covers you for allegations of mistakes and negligence.
In financial services that is typically anything that is deemed to be a complaint under Financial Conduct Authority rules.
It will help you provide a formal response to any complaints and will also cover any compensation that the Financial Ombudsman Service (FOS), you or your insurers deem payable.
Typical claims include allegations of negligent advice (where applicable) or allegations of poor performance.
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.
elements that can be included in your financial advisers insurance package
Professional indemnity for financial advisers
Professional indemnity covers you for allegations of negligence, usually anything that is deemed to be a complaint under FCA rules. Professional indemnity helps provide a formal response to complaints and will also cover compensation deemed payable.
Typical claims include allegations of negligent advice (where applicable) or allegations of poor performance.
Directors’ and officers’ insurance for financial advisers
Directors’ and officers’ insurance provides defence costs and monetary settlements in cases of claims made against company directors and senior managers. Complainants can include shareholders, regulators, or other third party stakeholders.
Directors’ and officers’ insurance usually excludes claims from clients related to advice provided by the business. Instead, this typically falls under the professional indemnity insurance module.
Cyber Insurance for financial advisers
Cyber insurance will cover costs associated with a cyber-attack. These can include legal fees, IT forensic costs, IT rebuild or restoration costs, costs associated with notifying data subjects and lost revenue during downtime.
Crime insurance for financial advisers
Crime insurance primarily concerns the cash within your business and protects your business against direct losses, including theft from employees.
It can also cover funds transfer fraud, depending on how crime insurance interacts with cyber insurance, particularly in relation to social engineering losses. We’ll help you understand this.
Office insurance for financial advisers
Office insurance is usually a combined policy, covering your business property in the office, laptops and employers and liability insurance.
It can also be extended to include business interruption which covers the loss of income and/or additional costs while your business is out of action.
