As a certified pension consultant, you are heavily involved in helping employers design, implement, manage, and supervise company-sponsored retirement programs. Companies rely on your financial advice and guidance in many aspects of retirement plan management, from choosing the right investments to mitigating compliance risk to negotiating lower management fees. The impact your work has on your clients is significant, and, depending on the size of the company, the services your business provides may influence the lives of tens of thousands of employees and their families.

As with any financial services profession where you are providing recommendations to clients on how to manage various financial vehicles, there comes a high level of liability and risk. Clients put their trust into your business’s services, and they expect that following your guidance should result in reasonably positive outcomes. Moreover, due to the nature of pension consulting, your business is privy to incredibly sensitive and confidential financial and personal information on your clients and their employees. Clients trust you to safeguard their data, and they expect your business to act in their best interests.

Run through a few hypothetical disaster scenarios, and it’s easy to see how your business may be susceptible to client lawsuits and claims. Give the wrong advice to a client, and they may sue for negligence. Mishandle sensitive customer data, and clients may sue for damages. An important way to safeguard your business from such risks is to ensure that you have the proper insurance coverages in place in the event of any unfortunate events. For the financial safety of your business and the people that you employ, it’s important to take time to research and consider investing in the right business insurance policies.

Consider purchasing business insurance for your pension consulting business if:

• You would like to insure your business against claims of poor performance or negligence
• You store client data like financial records or personally identifiable information (PII)
• You employ others
• You provide benefits to your employees, like health insurance or a 401(k)
• You lease or own your own office building and store valuable equipment or property
• Customers or clients visit your office

What insurance coverage do I need as a certified pension consultant?

Some of the most common business insurance coverages for pension consultants are listed below, along with examples of incidents that would trigger these coverages.

Professional Liability Insurance

Professional Liability Insurance, also known as Errors & Omissions Insurance, can protect your pension consultancy from client allegations of mistakes or negligence in your work. If any of the work or services you’ve provided causes financial losses for a client, they may blame your business and file suit for damages. Professional liability insurance can help cover for any legal fees, judgements, or settlement costs in the event of a client lawsuit.

Examples:

• Errors/Negligence: Your business is hired to create a pension plan for a local plumbers union. Years later, the union is unhappy with the investment options you selected for the plan, claiming those options suffered significant losses over a five-year period. The union sues your company for damages.
• Breach of duty: You are hired to advise on a pension plan that is being developed for employees of the City of San Francisco. Part of your work involves recommending money managers to manage the pension plan assets. The city follows your recommendations, but ultimately is unsatisfied with the performance of the money managers you selected. They find out later that the managers you chose were all personal friends of your business, and they accuse you of not acting in the city’s best interests.
• Lawsuits without merit: You are sued by a client who used your services to implement a new pension plan at their manufacturing company. The client claims the plan you helped setup suffered poor performance, resulting in heavy losses for the fund. As you dig into the details of the suit, you discover that many of your recommendations regarding the structure, fees, and investment options for the pension plan were not followed, and it is likely the fact that the client ignored your recommendations that resulted in their losses.

General Liability Insurance

General Liability Insurance protects your business financially from lawsuits and damages that arise while doing business, specifically for claims of bodily injury and property damage that are unintentionally caused by your business. This type of insurance is typically the most common coverage purchased for any business, regardless of industry, and it covers basic liability and risks that virtually all businesses are exposed to. General liability also includes coverage for personal and advertising injury, which covers several non-physical reputational injuries that are specifically defined.

Examples:

• Property Damage: An electrical fire that starts because of an overloaded power strip in your office spreads to a neighboring business, causing damage to their office furniture, equipment, and building. Your business’s general liability insurance would cover damage to your neighbor’s business.
• Bodily Injury: A client is visiting your office and slips on the recently mopped floor of your lobby. He injures his hip and sues your company for medical expenses.
• Personal and Advertising Injury: You are rebranding your pension consultancy and create a slogan to go with your logo. Your slogan of “Financial Dreams Delivered” is unfortunately exactly the same as another local financial services firm’s copyrighted tagline. Your company is sued for copyright infringement.

Commercial Property Insurance

Commercial Property Insurance can help protect the value of the physical property your business owns. If an unforeseen accident or natural disaster hits your business, having property insurance can help your business recover. Commercial property insurance typically covers property such as buildings, equipment, inventory, furniture, tools, artwork, and computers. Common covered causes of loss include fire, wind, hail, and vandalism.

Examples:

• Buildings: The office complex your business is located in is vandalized. Your office windows are shattered and graffiti covers your office walls. 
• Contents: A pipe bursts in your office building, damaging your office’s computers and servers. 
• Property of Others: The artwork that you have on lease in your lobby is damaged in a fire.

Additional Coverages

• A Business Owner’s Policy (BOP) combines the major property and liability risks that small businesses face into one convenient policy bundle. BOPs usually package together general liability, property insurance, and business income insurance into a single policy. The pricing on a BOP can often be lower than purchasing the insurance policies separately.
• Workers’ Compensation Insurance covers wages and medical expenses for employees who suffer work-related injuries or illnesses, and this type of coverage is required by law in many states. If an injured employee decides to accept these monetary benefits, he or she agrees not to sue your business.
  • Example: Your secretary suffers a repetitive stress injury in her hands from too much typing on the computer keyboard.
• Cyber Liability Insurance covers your business against liability and property losses caused by cyberattacks such as hacks, data breaches, denial of service attacks, and viruses.
  • Example: A hacker breaks into your company’s network and steals your customer records, including personally identifiable information on your clients.
• Employment Practices Liability Insurance provides financial protection for your business against employment claims of wrongful treatment such as discrimination, harassment, or other employment-related issues. Many businesses are susceptible to employee lawsuits claiming wrongful treatment, particularly small businesses that lack the proper employee training or guidelines.
  • Example: After a company holiday party, an employee files a lawsuit against the company claiming she was sexually harassed at the party.

Conclusion

Running a business that provides financial advice to clients can bear a lot of responsibility, especially if that advice involves employer-sponsored retirement plans, which can affect the financial futures of many employees and their families. As a pension consultant, you must be prepared for the liabilities that come with such an impactful profession. Whether its lawsuits that stem from client allegations of professional errors or breach of duty or claims of mismanagement of sensitive customer data, there are a variety of risks that are unique to the financial services sector. On top of that, there are the everyday risks that all business owners face. It could be a client who is injured when visiting your office or a natural disaster that damages your building. As a business owner, you should consider setting up the proper safeguards and protections to ensure that your business can financially weather the most common liabilities and risks.