Professional indemnity is the most important cover a financial advisor can purchase to guard against allegations of mis-selling and improper advice
Cover for Financial Ombudsman Service (FOS) awards is paramount with the award limit increasing to £445,000 from the 1st April 2025
IFA insurance can protect against a range of allegations - ensure you continues to purchase the most appropriate and cost-effective cover

IFA insurance

Independent Financial Advisers (IFAs) in the provision of offering advice across a range of products such as investments, pensions, and financial planning are exposed to a range of potential legal liabilities. Rather than being a single product, IFA insurance typically includes a number of insurance policies that combined to provide comprehensive protection.

From client disputes to regulatory scrutiny, financial advisors are more highly exposed than most professional firms to potential claims for compensation - especially arising from retail clients who are protected by the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS). This article explores the types of cover available, the risks it addresses, and how firms can choose the right protection.

Professional indemnity insurance

Professional indemnity insurance is the most important IFA Insurance, but should be combined with a number of other products to ensure there are no gaps in cover. IFA professional indemnity insurance offers protection against the failure to exercise reasonable skill and care in the provision of professional or advisory services.

Professional indemnity insurance for financial advisors continues to be challenging as a result of expensive allegations across the industry and the FCA's decision to increase the Financial Ombudsman Service (FOS) award limit. Firms that can demonstrate robust controls with a good claims history can still obtain discounts in the current market.

Proposal form for start-up IFA's

Proposal form for established IFA's

Examples of IFA professional indemnity claims:

• Improper advice

• Negligent act, error or omission

• Misrepresentation

• Non-disclosure

• Misuse of personal information

• Inadequate investigation

FCA insurance requirements for financial advisors:

The Financial Conduct Authority (FCA) requires all firms carry specified minimum levels of professional indemnity for both a single claim and aggregate claims.The minimum levels are: EUR 1,250,000 for a single claim and EUR 1,850,000 in the aggregate, however it is your firm's responsibility to take out adequate professional indemnity insurance. For UK based firms, these minimum requirements are translated into sterling and must be met at the date of taking out the policy and at the date of renewal. Firms should ensure they have:

• continuous cover since the start of your authorisation;

• a policy excess that is no higher than the minimum level specified; and

• cover in respect of Financial Ombudsman Service (FOS) awards.

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What financial adviser activities carry greater risk?

The financial advice exposure posed by IFA's has serious potential for high severity claims. With the principle risk arising from monetary loss attributable to the insureds negligence. The below identifies commonly accepted views on professional activities:

Medium risk financial advice

•  Estate planning
•  Home equity release
•  Investment advice
•  Income draw downs
•  Mortgages
•  Pensions
•  SIPPs

High risk financial advice

•  Corporate finance
•  High profile clients
•  Individual investments +£250k
•  Mergers & Acquisitions
•  Tax mitigation
•  Unregulated investments

If your firm operates in traditionally high-risk activities, be prepared to provide additional information to support your application. For example: investment type: amounts; providers; performance; and percentage of your clients investment portfolio. Clear detail concerning the scope of any high-risk activities will assist in obtaining competitive IFA professional indemnity insurance.

How to obtain the most competitive financial advisor insurance?

IFA's should start the renewal process in good time before the expiry date. To obtain the most competitive IFA professional indemnity we recommend you provide copies of your compliance procedures with your application. Insurance underwriters like to see robust procedures and controls to identify, assess and mitigate potential risks.

Preferably this will include:

•  details of any external compliance specialist;
•  details of your file audit process;
•  copy of your complaints register; and
•  biographies and qualifications.

Claims are sometimes inevitable, however these should be clearly detailed within a claims schedule highlighting any preventative measures undertaken to guard against recurrence.

Cyber insurance

IFAs will regularly handle sensitive personal client data and can be the target of cyber criminals. Cyber insurance can provide broad cover from a wide range of cyber attacks and data breaches. Cover can include the costs of notifying affected clients, regulatory fines (where insurable), business interruption losses, ransomware demands, and legal expenses.

Office insurance

This policy will provide cover for physical assets such as laptops, phones, and office equipment. In additional to public liability insurance, and employers' liability insurance which is a legal requirement if you have employees. Cost effective cover can be obtained for less than £300 for small businesses.

Directors and officers insurance

For limited companies or limited liability partnerships, directors' and officers' insurance is available to protects the personal assets of directors and senior decision-makers. It will offer cover for legal costs, regulatory investigations and liabilities if they are accused of wrongdoing on behalf of the company. For example, breach of fiduciary duty, mismanagement of funds, and employment practice disputes.

Contact us

At get indemnity™ we are professional indemnity specialists and can assist in obtaining competitive no-obligation quotes from the wholesale market. Financial advisers are exposed to a number of risks while offering their services on a range of financial issues. Ensure your firm continues to purchase the most appropriate and cost-effective cover. Contact us on 0345 625 0711 to discuss your needs.

About the author

Simon Taylor is a respected senior industry professional and a Chartered Insurance Broker with over 20 years’ of experience in the commercial insurance sector as an underwriter, broker and director.

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© 2025 Get Indemnity is the trading name of Insurance Direct Group Solutions Limited authorised and regulated in the UK by the Financial Conduct Authority (FRN 802038). This can be checked on the FCA financial services register by visiting the FCA website https://www.fca.org.uk or contacting the FCA on 0800 111 6768. Insurance Direct Group Solutions Limited is registered in England under company number 11078405. Registered office: The Minster Building, Great Tower Street, London, EC3R 7AG.

IFA Insurance - Financial Adviser Professional Indemnity

By Simon Taylor (ACII)

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