Advantages of a Wealth Advisor Insurance Policy
It is common practice for Registered Representatives to maintain professional liability insurance through their Broker/Dealer. However, as many advisors evolve their practice to RIA's their Broker/Dealer coverage may no longer continue to be sufficient.
It is important to have the opportunity to review your Broker/Dealer's policy (and, have it reviewed by a professional like NAPLIA). NAPLIA can assist your Broker/Dealer in improving their policy, and work with you to obtain a stand-alone policy that meets the needs of your individual practice.
Not all stand-alone policies are the same and it is important to review all provisions, conditions, and endorsements.
Eight Advantages of a stand-alone Professional Liability Policy over coverage for your RIA through your Broker/Dealer
1. Fiduciary Coverage
Affirmative Fiduciary coverage is one of
the most important coverage's not traditionally offered through
your B/D. Not all
policies are the same and with increasing scrutiny on fiduciary
responsibilities, you want to make sure your policy provides
coverage for your role as a "fiduciary".
2. Portable
A stand-alone policy is your policy
and evolves with your practice.
Insurance through your Broker/Dealer (B/D) is tied
directly to the services you provide for that B/D. If you
move to another B/D, or move on to provide other services, you
can not take your insurance coverage with you.
3. Prior Acts Coverage
With a stand-alone policy you maintain your
own Prior Acts Coverage (coverage for previous work that you
performed). Under
your B/D policy, you will typically lose your prior acts
coverage when you move to another B/D.
4. Individual Limit
Your limit with a stand-alone policy
applies solely to your firm.
The aggregate limit on a B/D policy is typically shared
by all of their Registered Reps. Therefore, claims against
other Representatives may reduce your available coverage.
5. Coverage for all your Services
A stand-alone policy can provide coverage
for your services as an Investment Advisor, Registered
Representative, Life Insurance Agent, Trustee, and Fiduciary.
A typical B/D policy will only provide coverage for
services that you provide through that B/D
6. Coverage for RIA Activities
a stand-alone policy is specifically
designed to meet the niche market of Registered Investment
Advisers. The B/D
policy may not cover all of the services that you provide and
typically will not provide coverage for RIA services.
7. Entity Coverage
A stand-alone policy policy provides
coverage for your entity and all advisers for work performed on
behalf of that entity. A B/D policy is intended to provide
coverage for the individual representative of the B/D.
Coverage is typically not provided for your entity.
8. Flexibility in Coverage
a stand-alone policy is a comprehensive
policy form that allows you to tailor coverage, through
endorsements, for the specific needs of your firm.
As a certificate holder of your B/D's coverage, you do
not have the ability to amend coverage as necessary to your
specific needs.
