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Investment Advisor Bond

What is an Investment Advisor Bond?

An Investment Advisor bond is a type of license surety bond. The bond is required by state governments as a requirement of individuals attempting to obtain an Investment Advisor license. The bond amount varies by state, typically ranging from $10,000 to $50,000. Like other types of license bonds, an investment advisor bond holds an individual responsible if they violate laws and codes of conduct relating to their professions – in this case, an investment advisor. The investor harmed by the investment advisor's misdeeds may file a claim against the bond seeking financial compensation. You may also hear this type of bond referred to as a Registered Investment Advisor (RIA) surety bond. Despite the slight difference in title, both surety bond types work the same way.

Investment Advisor Bond vs. Blue Sky Bond

Though similar, these are two distinct types of surety bonds. Blue Sky laws exist to deter fraud in the financial services industry. Blue Sky Bonds hold advisors accountable if they specifically violate Blue Sky laws, but they may not apply to all the categories of misbehavior that investment advisor bonds cover. Therefore, an advisor may need both kinds of bonds depending on what kind of advice he or she offers. If you're unsure about your own exact bonding requirements, rely on the experts at Viking Bond Service to help you figure things out.

How does an Investment Advisor Bond work?

Investment advisors must follow certain standards of professional conduct, which vary by state. If they violate the codes and it causes financial harm to an investor, the bond provides a way for the investor to seek out justice and hold the investment advisor financially responsible. The company that issues the bond guarantees payment for all valid claims filed against the bond. The bonded party (the investment advisor) has the final financial responsibility, but the surety will step in to pay the claim if the bonded investment advisor can't or won't. When that happens, the investment advisor must then pay the surety back.

In this way, investment advisor bonds serve two key functions. First, they provide a mechanism through which investors who feel they've been manipulated or deceived by their investment advisor can seek out damages in the form of financial compensation. Second, they provide a legally-binding framework to hold unethical advisors accountable – a framework that makes it less likely for them to escape financial responsibility or violate laws and professional practices with impunity.

The primary purpose of investment advisor surety bonds is preventative. By holding an investment advisor accountable for their misconduct, these bonds create a powerful incentive against doing anything illegal, unethical, or otherwise in violation of the bond agreement. Furthermore, by discouraging and, in many cases, preventing unscrupulous behaviors, RIA bonds help to build trust and confidence between an advisor and a client, who they trust to help them with sensitive financial decisions. RIA surety bonds help build trust between two parties and provide a legal mechanism to fall back on should that bond of trust break down. That explains why all investment advisors and many other professionals in risky industries must obtain a surety bond as part of their professional credentials.

Who should get an Investment Advisor Bond?

Anyone seeking an investment advisor license. Since it's illegal to work as an investment advisor without a license, and to obtain a license without a valid bond is impossible, it's crucial to secure a bond sooner rather than later. Offering investment advice without a valid license or bond could result in stiff penalties ranging from fines to permanent loss of license – which could end a career. To find an investment advisor surety bond fast, rely on the resources of Viking Bond Service. We serve investment advisors across the country in all 50 states. Our team of bond experts is here to help you understand your exact bonding needs, then get bonds to meet those needs in as little as 24 hours. Don't hesitate to contact us.

Investment Advisor License requirements

Investment advisor license requirements vary by state. All states put high standards in place to ensure that anyone who becomes an investment advisor has the character, principles, and stability to perform their function effectively and in a lawful manner. All states also include investment advisor bond requirements among the investment advisor license requirements.

License seekers will need to show proof of having the required surety bond before a license is granted. They will also need to prove they have an active bond in good standing to get their license renewed. Investment advisors should plan to have a bond for their entire career as license requirements make it mandatory. For that reason, it helps to have a long-term bond partner to rely on that can provide reliable, ongoing RIA bond service for years to come.

Bonding may be mandatory, but it doesn't have to be stressful, confusing, or time-consuming. Viking Bond Service is a trusted, reliable bond partner to the many investment advisors we work with nationwide. We will strive to be that partner for you too.

Will an Investment Advisor Surety Bond Work for Multiple States?

It will not. Bonds are only active and applicable in the state where they're issued. Advisors who plan to serve clients in multiple states will need to follow the necessary licensure requirements for each, including obtaining separate investment advisor bonds in individual states. This makes the bonding process more difficult for some advisors, but a strong bond partner like Viking Bond Service can help. As a surety serving all 50 states, we help clients get the RIA bonds they need no matter their state of residence or business. We can even help acquire RIA surety bonds in multiple states, so it does not require more time, input, or expense than necessary.

Who Are the Parties Involved in an Investment Advisor Surety Bond?

The investment advisor surety bond, like all kinds of surety bonds, involves three parties:

  • The Principal – The party that obtains the bond and must pay for all claims. The investment advisor is the principal.
  • The Obligee – The party that files a claim against the bond seeking compensation for damages. The investor is the obligee.
  • The Surety – The party that issues the bond to the principal and settles claims with the obligee. The surety acts like a line of credit that backs the principal up but must be paid back.

How much does an Investment Advisor Bond cost?

That depends on two primary factors. First, how big the bond must be as determined by the state. The bond amount determines how much the surety agrees to pay out in claims. Investment advisors pay just a small percentage of that amount to obtain the bond. The exact bond cost depends on the applicant's credit score and financial history. As long as an investment advisor avoids having claims filed against the bond, the premiums are the only cost.

Can you get an Investment Advisor Bond with bad credit?

Some surety bond companies deny applicants with bad credit and others don't. Increase your chances of being approved for a great bond at a competitive rate by working with Viking Bond Service – a national surety brokerage working with a vast array of surety relationships. Take advantage of a special program we offer specifically designed to help bond seekers with a low credit score or a blemish on their financial record.

How long does an Investment Advisor Bond remain valid?

Investment advisor bonds are annually renewable and are usually continuous in nature. This means that as long as the investment advisor license or registration is active, the bond requirement will persist. To renew a bond, an advisor will need to have their credit and bond-worthiness reevaluated by the surety company. Renewal could cost more or less than the previous bond cost depending on changes to the applicant's credit standing. After paying for renewal, the bond becomes active again for however long the bond agreement specified.

A quality surety brokerage like Viking Bond Service makes the renewal process easy and error-free by helping investment advisors stay aware of the renewal deadline and take action early enough that bond issues don't put their license in jeopardy. That being said, it's the final responsibility of the investment advisor to plan and prepare for the bond renewal on their own. That means going ahead with the renewal process before the coverage lapses. Just as important but often overlooked, it also means budgeting for the renewal premium while building a yearly budget. RIA surety bonds are a predictable business expense just like many others that investment advisors incur and should be treated as such.

How are claims handled for Investment Advisor Bonds?

Investments go south sometimes at no fault of the investment advisor. Upon receiving a claim, the surety will launch a comprehensive investigation to determine whether the investment advisor actually violated any laws. If so, the surety settles the claim, at which point the principal must pay the surety back the full amount of the debt with interest added and also likely the cost of the investigation.

It's important to emphasize that claims should be avoided at all costs. In addition to the cost of paying for claims against investment advisor surety bonds, whether that involves paying the obligee or paying even more to the surety, having a history of surety bond claims makes someone look riskier. Surety bond claims can result in bond cancellation which puts the license at risk. Worse, though, is that claims make it far more difficult to obtain another bond, which can put an investment advisor's career in jeopardy. RIA surety bonds are an obligation, but they don't have to become an obstacle. That starts by not causing any claims to be filed against the RIA bond.

How to get an Investment Advisor Bond?

To get the process started, submit a standard bond application to Viking Bond Service, along with any supplemental information the underwriter requires. Investment advisor bonds are usually simple and easy to process. Quotes are obtained the same day or within 24 hours in most cases. The bond becomes active once the principal pays the bond premium. At that point, the surety provides a document proving the bondholder has met the investment advisor bond requirement.

Why Partner With Viking Bond Service?

We work with investment advisors across the country and have long-standing relationships that have lasted for years. Why do so many investment advisors make us their surety agency of choice? Because we meet and exceed expectations. Bonding is an important requirement for any investment advisor – something that signals their seriousness to both regulators and potential clients. But it's not a priority for these busy professionals. They want bondings to be a fast, simple process that doesn't cause any stress. And they want bonds to be an affordable part of their business expenses. We understand what mortgage brokers want from the bonding process. Then we check all those boxes and many more. Don't just obtain a bond, find a surety agency you can partner with and rely on. Viking Bond Service will handle all your surety bond concerns.

Viking Bond Service – A Partner to Investment Advisors

If you're eager to get a bond ASAP to finish the surety bond requirements for an investor advisor's license, complete our online application 24/7. If you need more information first, we are happy to answer all your questions. Simply contact us through the form on this page or by calling 1-888-2-SURETY (1-888-278-7389).

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