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I
have coverage through my Broker Dealer (BD) and the policy provides
coverage for RIA activities is this enough?
BD policies vary.
As a result, it is important to review your policy and compare it to the
services you provide. BD policies typically exclude coverage for acts
as a fiduciary when performing services for ERISA type plans.
Additionally, the RIA coverage is often limited to the individual and
may not cover the advisor’s entity. Some BD polices also exclude
coverage for services not approved and products offered outside the BD.
What is the best way to determine if my current policy provides adequate
coverage for my practice?
Ask an expert.
NAPLIA can review your current policy and contrast it with the services
you provide without obligation. We can also point out deficiencies in
coverage, make recommendations and obtain competitive quotes for
comparison purposes.
What information do you need me to provide to receive a quote?
Completing a full
application is the best way to get a firm quote from a carrier. However
some carriers will review the ADV 1 (they may
also require the ADV II & schedule F) along with current revenues
to provide an estimate.
What firm attributes are used by the Underwriter (UW) to determine
premium?
The UW uses
revenues as the primary indicator of premium. Assets under management (AUM)
and discretionary versus non discretionary asset management is also
considered. Claim history may also have an impact on premium pricing.
I
hold the AIF* designation are there discounts available?
Yes. NAPLIA has
been successful in negotiating a premium discount of up to 10% with
several carriers for this and other designations.
My
client has asked me to be a fiduciary for their ERISA 401K plan, Can I
do this?
Fiduciary status
may be determined by the services performed for the client. When
serving in a fiduciary capacity to plan sponsor clients, advisors should
make sure their current policy provides coverage for acts as a
fiduciary. Additionally, all clients should have first party fiduciary
insurance.
Do
I need “Fiduciary Insurance”?
Fiduciary
Insurance is first party insurance purchased directly by the plan
sponsor client to cover a breach of fiduciary duties. Investment
Advisors need Errors & Omissions Insurance that covers their “acts as a
fiduciary” for the client.
What is the difference between first party and third party coverage?
First party
insurance is purchased directly by the individual/company who may be
impacted by a loss. Fiduciary Insurance is an example of this type of
coverage. Fiduciary Insurance would be purchased by a plan sponsor to
protect their own personal assets from allegations regarding a breach of
fiduciary duties.
Third party insurance is purchased by an individual company providing
services to a third party who may be impacted by a loss. Errors &
Omissions (E&O) Insurance is an example of this type of coverage. An
investment advisor would purchase E&O insurance for protection regarding
allegations of negligence when providing services to a client who may
have been harmed by such service.
My
BD requires my office to carry fidelity insurance of $1,000,000, can you
help with this?
Fidelity
insurance, also referred to as crime or employee dishonesty insurance,
is insurance to protect your clients from theft by your employees. There
are several different types available and coverage is easily attainable.
To ensure the correct coverage, the BD request would have to be reviewed
in advance.
How
do I obtain an ERISA bond for one of my clients 401K plans?
ERISA bonds are
usually first party bonds required by ERISA and paid for by the client.
Investment advisors can purchase a third party ERISA bond that would
provide coverage for their clients’ plans. They could be a blanket bond
covering all the advisor’s plans or a single plan bond. The bonds are
based on the assets of the individual plan.
I
am involved in a RFP and need to have a certificate for E & O insurance
that provides coverage as fiduciary, can you help?
NAPLIA can assist
you in attaining the proper insurance coverage. Once coverage is in
place, a certificate can be provided for the RFP proposal.
I
have been insured for several years with another carrier and I need to
make sure that I keep my prior acts coverage when I switch to the new
carrier.
Most carriers will
honor your current prior acts date. You should, however, be sure the
new coverage mirrors your current structure. If you are insured solely
through your BD, your prior acts coverage could be limited.
Where
can I locate a qualified Compliance Consultant?
Simply visit our
list of
preferred Compliance Partners for firms that have met
NAPLIA's qualifying standards.
* AIF designation is offered by
Fi360
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Investment Advisors Applications & Forms