When Scott started his financial advisory firm in Louisiana, he built his team with professionals he trusted. They managed investments, advised clients, and handled sensitive financial data. But one day, a long-time employee who had access to client funds disappeared—along with hundreds of thousands of dollars.
Scott never imagined that someone he trusted could commit such an act. While his firm had professional liability insurance and cyber coverage, those policies didn’t cover internal theft. The financial loss and reputational damage were overwhelming. That’s when Scott learned that a fidelity bond could have protected his business from this kind of employee dishonesty.
A fidelity bond, also called employee dishonesty insurance, protects financial advisory firms from losses due to employee theft, embezzlement, or fraud. Unlike general liability or professional liability insurance, which cover client lawsuits or business-related risks, fidelity bonds specifically safeguard against financial crimes committed by employees.
For financial advisors who manage client funds, retirement accounts, and investment portfolios, a single instance of fraud could result in lawsuits, regulatory penalties, and loss of client trust. A fidelity bond ensures that firms don’t bear the financial burden of an employee’s dishonest actions.
Financial advisory firms are at risk for internal fraud because:
A fidelity bond mitigates these risks by reimbursing firms for financial losses resulting from employee dishonesty.
Let's take a look at some of the most common.
If your financial advisory firm:
Then a fidelity bond is a necessity, not an option.
Many financial firms confuse fidelity bonds with commercial crime insurance. While both protect against employee theft, they serve different purposes.
Fidelity bonds cover financial losses caused by employee dishonesty, fraud, or embezzlement, reimbursing the firm for losses. Commercial crime insurance provides broader coverage, including external fraud, burglary, and cyber fraud.
A comprehensive risk management strategy often includes both a fidelity bond and commercial crime insurance for full protection.
Certain regulatory bodies require financial firms to carry fidelity bonds:
Selecting the right fidelity bond depends on firm size, services offered, and compliance needs. Consider the following:
Without a fidelity bond, a single dishonest employee could cause:
No financial firm is immune to internal fraud. Even the most trusted employees can make devastating financial mistakes—or worse, engage in intentional misconduct. A fidelity bond isn’t just an extra precaution—it’s a critical layer of financial security that ensures your firm, your clients, and your reputation remain protected.
If your Louisiana financial advisory firm doesn’t have a fidelity bond in place, now is the time to evaluate your risks and secure the right coverage. A single dishonest act can erase years of hard work—but with the right insurance, you won’t have to bear the loss alone.
Founded in 2017, Kastner Insurance Group is a full-service, independent insurance broker based in Lafayette, LA. Our insurance agents specialize in offering a variety of insurance products tailored to individual and commercial needs, making sure clients receive personalized and comprehensive coverage options from a variety of insurance companies/insurance carriers.
With over 43 years of combined experience, the team at Kastner Insurance Group is dedicated to providing expert advice and exceptional service. They proudly serve professional offices and businesses across Lafayette city/parish, Youngsville, Broussard, Baton Rouge, New Orleans, Alexandria, Acadiana, and statewide in Louisiana.
Call us today or visit our website for a customized quote.
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