InvestaGuard From InterWeb Insurance

InvestaGuard is the best E&O policy for financial firms our industry has seen in 15 years, and it's exclusively available through InterWeb Insurance LLC.
 

  
Designed for Broker-Dealer, Registered Investment Advisor and Insurance Agency firms and their advisors.
With over 30 years’ experience brokering financial services E&O, we created this policy with you, the policyholder, in mind.

Alternative Mutual Funds - Complexity of a Vanilla Product

 Nearly 40% of advisors are using alternative investments.

  
Alternative Mutual Funds (AMFs) are a far departure from traditional funds as they are complex, have limited liquidity and are on FINRA's radar. Tune in to learn more, including how they can be appropriate for your practice.

E&O Part of your Business Continuation Plan

March 15, 2017 | By Sheri Pontolillo,

 

The road you choose toward your goal of “sailing into the sunset” after a successful career can vary.  It could be a gradual transition as you bring a family member up and into the business for a hand-off.  You may choose to sell your business to an associate or other buyer.  Or, you could simply retire outright.  E&O is a very important part of your transition plan. Imagine this!  You’ve been in the business for 20 years, you retire, and while sipping on a very dry martini on the back of your yacht, you get a call from your attorney “You’ve been sued!” for something that happened five years ago.  Panic? or Peace?  I can tell you it will depend upon how well you prepared for that moment.

Here’s how it works, hold on as I speak “insurance lingo”.   There are generally two types of policies 1. Claims-Made and 2. Occurrence.  You’ve probably heard of a “claims-made” policy because most E&O policies are of this type.  This means the policy will only respond if the claim is made against you (and reported) to the insurer during the 12 month policy period.  This is very different than occurrence policies, which is where you report a claim to the policy you had when the alleged error occurred.  General Liability is typically written on an occurrence policy form.

Now, back to our example.  When that claim arrives, you do NOT report the claim to the insurer you had when the alleged error occurred (which is what most people assume).  Rather, you must have coverage at the time a claim is made against you. 

Are you going to maintain a policy indefinitely into your retirement No.  You’re looking for what is called an Extended Reporting Period, or informally called a “tail” option.  This is a window of time attached to your last E&O policy that allows you to report a new claim that arises from activities you performed before you retired.  You purchase this as an add-on to your last E&O policy.

Here’s the kicker the availability of the ERP option must exist in the last policy you bought when you purchased it.  It’s not something you can ask for if you retire in the middle of the policy.  And, not all policies offer an ERP or “tail” as we call it.

Here are our recommendations:
1. Start Early One to two years prior to retirement or sale, start looking for an E&O policy that offers a tail option.

2.  Plan On The Expense of An ERP ERP’s are for a definite period of time typically 1 year, 3, years, 5 years and occasionally an Unlimited Period (forever).  Obviously, you want the longest period available.  The costs vary 75% to 500% of your last annual premium, depending upon the length of the ERP.  This sounds expensive, but it is a one-time charge.  Personally, I would pay almost any amount to protect my retirement assets in my Golden Years.  Note to self Don’t be fooled into thinking that a statute of limitations is going to protect you.  The statute is of little help.  This is because they start running “when your client first knows of the problem”, which can be when they finally read their statements, decide they’ve lost money and you’re to blame, when their kids second-guess what mom & dad have done with their retirement, or when their son-in-law becomes a lawyer.

3. Buy A Policy You Control When you’re finally ready to think about making the transition in a year or two, it is best for you to be in a policy that you control, for example an agency policy, or if you’re an RIA, one in the entity name.  This is important so you can negotiate the terms of the desired ERP, changes to the entity name if you sell to another firm, changes in the officers/directors or controlling parties, etc.

4. Find A Good E&O Broker – The approach you will take to the ERP will depend upon the type of retirement transition.  You’ll want to work with a good E&O broker at that time.  You may be able to creatively save money on the ERP by employing a temporary strategy.  For example, adding the new owners or changing the name while you remain on the policy for a year or two if you’re not fully exiting the business right away.  Good ERPs are expensive, and the time period is finite, so you want to make the most of your insurance dollar and a good E&O broker can help you do that.

5. Tell Your Heirs – Most of the better policies available will cover your spouse, heirs or executors.  This is important for them to know in the event of your incapacity or death.  Your assets will most likely be their assets, and E&O can help protect them.

In summary, the goal is to put the right tools in place to give you control of your ERP options, flexibility to consider different exit strategies and save premium dollars if possible as you protect your retirement assets and provide peace of mind for you and your loved ones.