Financial Advisers

What can go wrong?

Sub-prime mortgages, poorly performing investments, endowments, mis-selling of payment protection … the provision of financial advice can be a legal and regulatory minefield. There isn’t just negligent advice to consider; there’s improper use of client information, failure to execute a transaction, loss of documents, breach of trust and regulatory changes which throw into question work undertaken in the past.

If something does go wrong, the impact can be catastrophic because the ‘error’ is often replicated across many clients. Add to that the host of legal practices waiting for – and indeed hunting out – potential claimants and its clear financial advisers need expert advice when arranging their Professional Indemnity insurance.

Cover considerations

The Financial Conduct Authority requires firms to carry professional indemnity insurance as a condition of authorisation. Both Lloyd’s and the company insurance markets have stripped cover back in recent years as the profession’s claims experience has deteriorated. Be sure cover is provided for all activities, both present and past.

What are insurers looking for?

There is a relatively small pool of insurers providing cover for financial advisers and they require detailed information including: the type of advice and products offered (both now and in the past); highest and average size of investments; any high profile clients; details of any mergers, acquisitions and restructures; compliance procedures and management; the qualifications and experience of staff providing advice and administering products; the outcome of any visits from the regulator and of course the firm’s claims experience. Specific issues arise from time to time that may prompt unexpected questions.

Proposal forms for financial advisers are commonly long and time-consuming to complete but it’s critical that they are done so accurately and present the business in the best light.

To find out more about
call or email:

Nick Bender
Joint Managing Director
Tel: 020 3757 0125