When you think about the safety of your investment assets, you might think in terms of market volatility, high- versus low-risk investment vehicles or the possibility of your investments simply losing value.
But that’s not the only type of safety investors need to be most concerned with.
Depending on where your assets are held, they may or may not be insured against the failure of the banking institution or brokerage responsible for them.
Investment Assets Protected by the FDIC
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that protects funds deposited with banks and savings associations.
The FDIC insures deposit balances of up to $250,000 for checking and savings accounts, certificates of deposit and money market accounts, as long as the accounts are held with an FDIC member bank. Each depositor is covered for one of each type of account per insured bank.
Many investment opportunities fall under the protection of the FDIC.
Investment Assets Protected by the SIPC
The Securities Investor Protection Corporation (SIPC) insures cash and securities (stocks, bonds) held by troubled or insolvent SIPC member brokerage firms.
If the brokerage closes and your investment assets disappear, the SIPC steps in to recover them. If they cannot, SIPC will restore up to $500,000 in cash and securities (in like kind), with a $250,000 maximum protection for cash you may have had on deposit with the brokerage.
SIPC may help you recover more than these limits if they are able to locate and restore your missing assets from the defunct brokerage firm. They have no limit on how much they can restore. The coverage they provide applies to those assets that are untraceable or unrecoverable. SIPC has a strong track record, as fewer than 350 people have been unable to get the full value of their assets back, and most of those occurred prior to 1978 when the maximum benefit was $50,000.
Countless investment vehicles qualify for SIPC coverage. However, always verify with your wealth advisor that your investment assets will be protected.
Other Forms of Investment Asset Protection
When assets do not qualify for FDIC or SIPC protection, you may be covered by supplemental insurance provided by your investment advisor. This is another important reason you should consider carefully before selecting a financial planner or investment advisor.
When you work with a wealth management firm, you can rest assured that they have a fiduciary duty to put your financial interests above anyone else’s. Among their legal and ethical obligations to their clients, wealth advisors must act in good faith, serve your best interests, use professional skill and judgment in all dealings with you, and disclose all material facts.
Divergent Wealth Advisors is a Registered Investment Advisor (RIA) firm, which means we are registered with the Utah Division of Securities. All our wealth managers are Certified Financial Planners™, the gold standard of financial advisor credentials. Our investment strategies are designed to provide the strongest available asset protections, and we have access to programs insured by the FDIC and SIPC as well as supplemental insurance coverage.
Contact us today to schedule a consultation or interactive planning session to discuss strategies and protection for your investment assets.
DISCLAIMER: It is important to note that this information is not meant to provide investment, tax, legal or accounting advice. This material is for informational purposes only, and is not intended to provide, and should not be relied on for, investment, tax, legal or accounting advice. You should always consult your own financial planning, tax, legal and accounting advisors before engaging in any transaction.
Approved by Rick Collins, Divergent Wealth Advisors LLC, Chief Compliance Officer 5/8/2018