In the simplest terms, risk management is the assessment, mitigation, monitoring, and transfer of risk.
For an investment adviser, some fundamental steps to avoid malpractice claims are:
- Obtain an executed copy of the pan trust document
- Evaluate the client’s surety/fidelity bond & fiduciary insurance coverage of existing and potential clients
- Avoid clients without adequate coverage
- Refrain from working with, or recommending advisers who lack E&O Fiduciary Coverage
- Review your policy, particularly the exclusions, and ensure you have the correct fiduciary coverage for the specific services you provide, including acts as a fiduciary.
- If your BD’s E&O policy does not include fiduciary coverage, purchase a stand alone policy with affirmative coverage.
- Incorporate protection into your contracts with clients.
- Avoid conflicts.
- Operate with full fee transparency, including referral fees.
- Avoid problematic / difficult clients.
- Do not promote capabilities where expertise is lacking.
- Ensure your website accurately describes your services and skills.
However, the concept of risk management has much broader ramifications, which exceed the scope of this website.
This information is intended to provide a general overview of the coverage described. Only the insurance policy and any coverage quotation offered can give actual terms, coverage, conditions and exclusions.