Understanding Errors and Omissions Insurance for Finance Advisors

Understanding Errors and Omissions Insurance for Finance Advisors

As a financial advisor, you’re someone who helps people go from “working for their money” to “having their money work for them.” And as everyone knows, that type of money can open up a whole new world for a person.

That being said, however, money has a way of bringing out the best and the worst out of people. Tempers flare, family members, get worried, and it’s not unusual for people to start acting out at the mere possibility of adding to their bank accounts. 

And while you may be exceptional at vetting your clients and explaining the risks, are you as prepared for the unexpected as you could be? If a disgruntled client or a client’s estate were to make a claim tomorrow, can you honestly say that you’d be ready?

If you’re exploring the merits of errors and omissions insurance policy for a financial advisor, then you’ll definitely want to keep reading.

Four Reasons Why Errors and Omissions Insurance for Financial Advisors Should Be a Non-Negotiable

Errors and Omissions Insurance for Financial Advisors
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1. Claims May Arise Years After the Fact

Being a financial advisor is an interesting business in that conversations and advice are never truly done and dealt with. A lawsuit can happen over a transaction that took place a long time ago in ways that you might not see in some other industries.

For instance, ten years ago you could have said something to a client that was acted upon. But while you may think the conversation was all but forgotten, the client’s estate may not begin attempting to settle bills until well after the fact. And worst of all, it could be months, years, or even decades before anyone notices there was a problem or a piece of forgotten paperwork.

With errors and omissions insurance policy you can be prepared for anything that happens. 

2. Mistakes Can Happen to Anyone at Any Time

Even the most meticulous, careful, and precise financial advisor has the potential to make a mistake. 

Sometimes a particularly busy period hits and after a few weeks of working late hours a key detail gets overlooked. Maybe a concept wasn’t properly explained and so a client misunderstood what was being said or otherwise underestimated the level of risk involved with pursuing a particular financial strategy. There are times when errors are made that entitle the client to at least some compensation. 

Making these sorts of payments out-of-pocket may not be feasible in terms of general business cash flow. To that end, errors and omissions insurance policy can help you navigate these situations while minimizing the financial disruption that often comes part and parcel with these kinds of situations. 

3. Emotions Sometimes Run High When There’s Money Involved

When there’s money on the line, people can get very emotional. And wherever there are inheritances and livelihoods at stake, there’s always the potential for formerly strong relationships to take a turn for the worse. 

While a financial advisor can rely on their experience and knowledge to give advice to their clients, the reality is that many of the things that can impact a client’s return on investment aren’t within your direct control.  Stock market movements are far from predictable, economic factors that no one saw coming can suddenly become major market drivers, and recessions can bring uncertainty to formerly safe, no-brainer investment decisions.

However, upset relatives or emotional clients may not always see it that way. And even in cases where you’re not liable and you’ve done your due diligence, lawsuits aren’t cheap. Errors and omissions insurance is an option that can keep you protected at all times. 

4. Insurance Can Reassure Clients of Your Professionalism

What a lot of people don’t know about being a financial advisor is that the job can involve a certain element of sales. It’s not just about knowing how to time the market, analyze stocks, or recommend insurance products to people. It’s also about earning people’s trust and positioning yourself as a professional who has their best interests at heart. 

Errors and omissions insurance policy can give you a credibility boost in the eyes of someone who may be on the fence. For this type of client, it’s not always enough to give them the chance to maximize their wealth. They also want to have a backup option in the event that something goes wrong. Carrying errors and omissions insurance can signal to more cautious clients that you’re committed to your career while giving them the confidence they need to go forward with you as their financial advisor.

The Two Things Every Financial Advisor Needs From Their Insurance Broker

1. Solutions That Make Sense For Them

At the end of the day, every financial advisor is going to come to an insurance broker with different needs. After all, a financial advisor who operates as more of a consultant is going to have different concerns from a full-on firm with multiple staff and employees. Similarly, if an advisor is licensed to sell insurance or mutual funds but not other types of securities, a broker pushing a one-size-fits-all policy may not be a good choice. 

That’s why it’s essential to find a mortgage broker who will hear you and work with you to find an errors and omissions insurance policy that addresses your needs. 

2. Access to Excellent Insurance Plans 

From a professional standpoint, you can’t afford to mess around when it comes to finding high-quality errors and omissions insurance for financial advisors. An insurance broker usually has access to numerous plans and policies that can deliver the coverage you need at lower rates. However, not all insurance brokers are made equal. Having the wrong coverage level or being forced to pay higher rates is the last thing you want. That’s why it pays to work with an insurance broker with a proven track record when it comes to helping financial advisors find excellent policies at the lowest rates possible.


For the vast majority of people, money is an extremely serious and personal matter. And when you’re advising people on how to handle their money, things can get very messy very quickly. As a financial advisor, managing financial risk for your clients is literally a part of your job description. Errors and omissions insurance can make it easier for you to manage your professional risks as well. 

Protect yourself and your business with errors and omissions insurance for financial advisors. Contact an ALIGNED broker and get started today!

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