Custodian Insurance Requirements: What RIAs Must Have

Your custodian can drop you without the right insurance. Schwab, Fidelity, Altruist, and Pershing each have different RIA insurance requirements. Miss them and lose access. This guide breaks down exactly what each custodian needs and the coverage mistakes that get RIAs in trouble.

Your custodian can say "see ya later" if you don't have the right insurance.

99.9% of RIAs use a custodian to hold client assets. Schwab, Fidelity, Altruist, and Pershing all have insurance requirements. Miss those requirements, and you lose access to your custodian. No custodian means no business.

Why Custodians Care

Custodians protect themselves. When RIAs make mistakes, custodians face lawsuits too. Insurance requirements shift that risk back to you.

What These Coverages Actually Do

E&O (Errors & Omissions): Covers you when someone claims you messed up. A client says you gave bad advice. You made a trade error. They allege you botched their paperwork. Right or wrong, E&O pays for your defense and any settlement.

Social Engineering: A bad actor pretends to be your client and tricks you into wiring money. This is a real "Gotcha". On most cyber policies, Social Engineering only covers YOUR firm's money (1st party). It doesn't cover client money (3rd party). Working with a specialist will get you squared away.

Theft: Covers employee theft. Your employee steals client money. Theft insurance pays the client back. Solo RIAs don't need this. You can't steal from yourself.

Cyber: Covers data breaches and hacking. Someone steals client data. Your systems get locked by ransomware. Cyber pays for the cleanup, notifications, and lawsuits.

What Each Custodian Requires (as of November 2025)

Charles Schwab

E&O: $1 million
Social Engineering: Required (any amount)
Theft: Required (any amount) - not necessary if a 1-person shop

Fidelity

E&O: $1 million
Social Engineering: $250,000
Theft: Required (any amount) - not necessary if a 1-person shop

Altruist

E&O: $1 million
Cyber: Required (any amount)
Social Engineering: Required (any amount)

Pershing/BNY Mellon

E&O: $1 million
Cyber: $250,000
Social Engineering: $250,000
Theft: Required (any amount) - not necessary if a 1-person shop

The Letter vs. Reality

Schwab says you need $1 million in E&O plus social engineering and theft coverage. You could buy $1 million E&O, $1 of social engineering, and $1 of theft. That meets the letter of their requirements.

No insurance carrier sells policies like that.

Most RIAs buy $1 million limits across all coverages. It costs less than mixing different limits. It simplifies renewals. And it exceeds every custodian's requirements.

Common Mistakes RIAs Make

Buying cyber coverage that doesn't count. Some cyber policies exclude social engineering. Check your policy language.
Assuming one policy fits all custodians. Altruist requires cyber. Fidelity doesn't. Know your custodian's rules.

What You Need to Do

Pull your current insurance policy
Check it against your custodian's requirements
Fix any gaps before your renewal

Your custodian won't remind you. They'll just restrict your access when you fall short.

BPI structures policies that meet every major custodian's requirements. We know what each custodian needs because we work with them all.

Get compliant. Stay compliant. Keep your business running.