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Investment Professionals - Frequently Asked Questions

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 advisors 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.

* AIF designation is offered by Fi360