Giving Out Financial Advice? Don’t Forget This Essential Step

Being a financial advisor is a highly lucrative and rewarding career. You have the opportunity to help people achieve their goals and live out their dreams. To see someone turn a small investment into a fortune is a highly rewarding experience. However, it’s not without its risks. Without careful planning, you might find yourself in financial trouble as the result of legal action.

Building your career on handing out advice can be difficult. Obviously, no one has a magic ball that can predict the future, so the majority of financial advice is resting on experience and speculation. Financial advisors use their past experience and knowledge of the markets to predict future trends. They might also offer advice on the best life insurance policies and property investments. Nothing in the financial industry is guaranteed, so all advice must be taken with a pinch of salt. Get in wrong, and your client could stand to lose a lot.

With this in mind, it’s important that all financial advisors are sufficiently protected. Here are three reasons all financial advisors should protect themselves and their livelihoods with professional indemnity insurance.

Your reputation is on the line

Many financial advisors rely on personal recommendations to grow their client base. Very few people will take advice from someone who hasn’t been personally recommended to them by someone they trust. For this reason, it’s important that you protect yourself from instances on slander or libel. Many insurance policies will include free legal advice and support.

This means that, if an investment goes wrong and an individual chooses not to go down the legal route but instead smears your name around town, you’ll have the backing of a legal team. Many people think that insurance only covers legal action against you, but it also covers your expenses if you need to take action against someone else.

Some clients will demand it

Some people won’t even start working with you without proof that you are insured. Being insured shows that you take your career seriously and that you are committed to providing good service. While some people might think it makes them look like they are afraid of legal action, on the contrary, it says that you are aware of the risks associated with handing out financial advice.

Claims can come years after

When choosing a professional indemnity insurance policy, you should look for one that has runoff cover. This means that you will be protected for any work that was carried out during your active insurance coverage, even if you stop your insurance because you retire. Investments can go bad long after they are made, and if a client chooses to link this back to you, this can spell bad news if it happens after your insurance has ended. This is most likely to happen after you have decided to retire and no longer require professional indemnity insurance. To avoid someone coming after you in your retirement, make sure you have runoff coverage.