Schwab is now requiring every RIA on its platform to carry at least $1 million in errors and omissions insurance, and our Managing Principal, Daren Blonski, wasn't surprised it had to be a mandate. He told Financial Advisor magazine, for its article "Schwab Requires All RIA Clients To Get Expansive $1 Million E&O Policy," "When I received the email yesterday it was interesting that they had to send it out. It tells you that a lot of people are operating without E&O." Daren, who runs a $420 million RIA and clears 100% through Schwab, already carries the coverage himself. As he put it, "operating without it is like being a good driver and thinking you will never get in an accident."
Key Takeaways
-
Schwab's new requirement means every RIA that clears through it now needs at least $1 million in E&O coverage, plus protection against social engineering and hacking.
-
The fact that Schwab had to mandate this at all suggests a meaningful number of advisors were operating without it.
-
Combined E&O and cyber liability coverage runs in the range of a few thousand dollars a year, a small cost relative to the protection it provides.
-
Carrying E&O insurance isn't about assuming something will go wrong. It's about not betting your firm and your clients on the assumption that nothing ever will.
-
Sonoma Wealth Advisors is already carrying this coverage well ahead of Schwab requiring it firm-wide.
Being proactive about protecting clients, not just reactive to what's required, is part of how we operate. Learn more on our About Us page.