As an investment management consultant, you are responsible for helping your clients plan their financial futures. Whether you are helping them allocate money to send their children to college or preparing them to buy their first home, your input is a necessary and valuable part of their decision-making process. With great responsibility comes great power, and unfortunately, there can be a variety of liabilities associated with your work. If your client listens to your professional opinion and is not satisfied with the result, they might decide to sue. If an employee of yours makes an error in their work, causing a client to lose tens of thousands of dollars, your firm could be held liable.

In order to protect your assets and ensure the stability of your company, consider the benefits of having a comprehensive business insurance policy. There are many different types of insurance that you might consider as an investment management consultant. An important factor to take into account is that you and your employees work in a professional field, and unlike with a restaurant or clothing store, an error by your colleagues can have serious financial repercussions for your customers.

You may be interested in purchasing insurance for your investment management consulting firm if:

• You would like to insure your services and practice against claims of poor performance or errors in your work
• You store sensitive customer or employee data
• You employ others
• You provide benefits to your employees, like health insurance or a 401(k)
• You work in an office that you lease or own and store valuable equipment or property in that office
• Customers or clients visit your office

What insurance coverage do I need as an investment management consultant?

The most common insurance policies for an investment management consulting firm often include policies that apply to all businesses, like general liability insurance. However, for companies in the financial services sector, whose work may result in financial consequences for their clients, professional liability insurance is a popular coverage to purchase. Listed below are the major insurance coverages you should consider.

Professional Liability Insurance or Errors and Omissions (E&O) Insurance

Everybody makes mistakes, but if you work as an investment management consultant, those mistakes can create serious problems for your customers. Investment management consultants are especially vulnerable to lawsuits because the errors they make can land their client in financial trouble. Professional liability insurance protects you from a lawsuit, whether or not your company is at fault, if you are accused of making an error in your work. Covered areas for professional liability insurance include negligence, misleading statements, performance, and breach of duty.

Examples:

• Errors/Negligence: One of your clients intends to send his daughters to college within the next five years. The consultant who is working with him fails to take that into account when creating your client’s investment strategy, resulting in a series of investments that result in losses over the five-year period. The client sues your firm for damages.
• Lawsuit without merit: A client has unrealistic expectations about the returns your firm can generate for her. She hires your firm to create a short-term investment strategy, but she claims that the plan you created only generated a 10% return and not the 30% return she was expecting. She sues your firm.

General Liability Insurance

General liability insurance can help protect your investment management consulting firm from the financial burden of a lawsuit that is unrelated to your consulting work. The four types of coverage that are included in general liability insurance are: products & completed operations, property damage, bodily injury, and personal & advertising injury. General liability also covers the costs of any legal defense or attorney’s fees incurred while defending against covered lawsuits.

Examples:

• Property Damage: Your client brings his MacBook Pro into your office to show you some investments he is interested in. An employee of yours spills water onto the MacBook, ruining the computer. Your client sues your firm for the cost to replace the computer.
• Bodily Injury: One of your best consultants is meeting with a client to discuss his investments and how they have changed over the past year. However, as the client is leaving your office, one of your interns stumbles and spills a pot of hot coffee all over him. He sues you for the injury.
• Advertising Injury: You have an amazing idea for a commercial that is based on the musical “West Side Story.” You make the ad, and it’s a hit. Unfortunately, another investment management consulting firm in your city has an ad based on the musical “Oklahoma,” and they think that you copied them. They decide to sue.

Commercial Property Insurance

If there is extensive physical damage to property or equipment that you lease or own, the expense of replacing it can negatively affect your bottom line. Commercial property insurance protects you from these costs, by paying for you to replace or rebuild damaged items or structures. The included damage can happen to a building or item that you rent, lease, own, or have borrowed from someone else. Covered items include, but are not limited to: paintings, furniture, office equipment, and computers.

Examples:

• Buildings: You own a large office building. During a Christmas party, one of your employees lights too many candles and starts a fire. Though it’s quickly put out, half of the walls on the second story are badly burned.
• Contents: Your business relies on 30 high-end laptops to complete work. After an employee who was attempting to smoke inside sets off the fire sprinklers, 20 of the computers are doused in water and can’t be repaired.
• Property of Others: One of your managers borrows a high-end 3D printer to demonstrate why they are such good financial investments. Over the weekend, someone breaks into the office and steals the printer.

Cyber Liability Insurance

As an investment management consultant, most of your work will be done with computers, which may be connected to a public and private network. That’s why it’s especially important to guard your business against the negative impact of any technological mishaps. Cyber liability insurance can protect you from hacking, viruses, data breaches, and other cyber perils.

Cyber liability insurance also covers the costs of:

• Lawsuits against you for lost data
• Notifying customers and business partners about a data breach
• Marketing to restore your reputation
• Lost income
• Lost or damaged electronic data

Example:

• Your business is hacked by a group of cyber terrorists who are against the 1%. They broadcast to the internet that your firm should be known for two things: exploiting capitalism’s underclass and being easy to hack. The video goes viral, and your customers start pulling out. Because business slows due to your damaged reputation, you must launch a marketing campaign that positions you as being at the forefront of finance and technology.

Business Owner’s Policy

A business owner’s policy, also known as a “BOP,” can cover risks that are common to all business owners. If you own a small investment management consulting firm, and you work with customers inside of commercial space that you rent or own, a business owner’s policy may be a good solution for you. In this type of plan, general liability, business interruption, and property insurance are bundled together to address your needs as a small business owner. This coverage can protect you from a lawsuit and pay to cover the replacement costs of some types of damage.

Final Word

You can protect your investment management consulting firm from the dangers of an unforeseen lawsuit or an unexpected disaster by purchasing business insurance. Not only can you be covered against such risks as professional errors and hacking, but you can also have the general liability and commercial property coverage that every independent business needs. As an investment management consultant, your input can have a substantial impact on your client’s financial future. Though the market may be unpredictable, the longevity and well-being of your business doesn’t have to be. That’s why purchasing the right business insurance coverage for your business can be one of the best investments you can make.