There are many types of financial advisers such as accountants, private bankers, stock brokers and investment consultants. Their service portfolio may vary based on the specific area of expertise they are involved in.
While some advisors may help clients verify procurements and make sale orders others help in matters such as opening new accounts, transferring assets and maintaining proper records.
Due to the risks involved with giving professional advice, it’s highly recommended for an advisor to take an appropriate professional indemnity insurance policy.
Benefits of the policy
1. It can be used to cover the costs of liability in case the client’s money is lost or misplaced for any unprecedented reasons. Customers would require their financial advisors to give an account of every penny that goes through them, especially when transferring huge sums of money. Failure to which they may consider legal action.
2. Experts who can’t pay the required amount to hire lawyers may end up being sued for all they have and this may render them bankrupt in the long run, with no other option left but to close operation simply because of one unsatisfied customer.
3. Indemnity insurance can also help financial advisors meet any impromptu costs that may arise in their daily operations. For instance, in case they want to relocate their offices to another place and the authorities concerned request for licensing payment before opening business. Those who can’t meet these rates may have to stall their operations till all necessary permits have been paid for.
4. An insured fiscal consultant often stands out as more professional compared to those who aren’t covered. Studies show that clients prefer working with specialists who have comprehensive indemnity policies, most of them feel as if their interests would be well protected under such circumstances. As such, experts who don’t sign up for this program run a risk of losing clients to their competitors.
5. Some state laws mandate all financial service providers to be insured, those that fail to abide by this rule may be arrested or have their businesses terminated.
Professional indemnity insurance is designed to cover the policy holder’s errors, omissions or failure to perform certain consultancy duties that were contracted to him.
Nonetheless, this coverage doesn’t include criminal prosecutions labelled against the service provider. For additional information, check out this article which details more about insuring professional advice.