Registered Investment Advisors E&O (RIA E&O) and Cyber:
Custodian Requirments
Every major RIA custodian now requires proof of E&O insurance before you can custody client assets, but the specific requirements differ by platform, and most advisors don't find out until onboarding. These guides break down exactly what Schwab, Fidelity, Pershing, Altruist, and others require so you're not scrambling at the last minute."
Schwab RIA E&O and Cyber Requirement
The required insurance must include coverage for:
Errors & Omissions
Professional liability coverage for claims arising from advisory services, including alleged errors, omissions, negligence, trade errors, or failure to perform professional duties.
Social Engineering
Coverage for fraud scenarios where an attacker manipulates employees, advisers, or clients into disclosing information, changing payment instructions, or transferring funds.
Theft by Hacker
Coverage for cybercriminal or hacker-related theft events involving client or firm assets.
Theft by Employee, if applicable
Coverage for employee theft or dishonesty where the firm has employees or other applicable personnel exposure.
Schwab frames the requirement as an aggregate minimum of $1 million, not necessarily $1 million separately for each coverage type.
Schwab also makes three things clear:
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$1 million is only the minimum.
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Higher limits may be required on exception requests, fraud events, trade errors, or other events communicated to the firm.
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Each RIA should consider whether higher limits are appropriate based on the size and type of the firm, its advisory services, client profile, employees, and the level of protection needed for the firm and its clients.
Fidelity RIA E&O Insurance Requirements
Fidelity’s reported requirements include:
Errors & Omissions
Professional liability coverage with at least $1 million in coverage for claims arising from advisory services, alleged errors, omissions, negligence, or professional mistakes.
Social Engineering
Coverage of at least $250,000 for damages and expenses arising from social engineering attacks. These are fraud scenarios where an attacker tricks employees, advisers, or clients into disclosing confidential information, changing instructions, or transferring funds.
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Fidelity allows the social engineering requirement to be satisfied through an endorsement or rider on the E&O policy or through a standalone cyber policy.
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The $250,000 social engineering coverage can count toward the $1 million minimum coverage requirement.
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Financial Institution Bond / Employee Dishonesty Coverage
Fidelity also requires a financial institution bond or other coverage protecting against direct losses caused by employee criminal conduct, such as fraud or theft.
Fidelity Social Engineering Requirement in Practice
The $250,000 social engineering requirement is the element most likely to create a hidden compliance gap.
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An RIA may carry a $1 million E&O policy and still fail to satisfy Fidelity’s requirement if the policy does not expressly include social engineering coverage or if the social engineering sublimit is below $250,000.
This issue is especially important because
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E&O policies often exclude cyber-related fraud events.
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Some policies exclude social engineering entirely.
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Others include limited cyber or funds-transfer fraud endorsements that may not cover the full damages and expenses associated with a social engineering claim.
Before assuming a current policy satisfies Fidelity’s requirement, an RIA should confirm:
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Whether social engineering is expressly covered
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Whether the social engineering sublimit is at least $250,000
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Whether coverage applies to both damages and expenses
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Whether the coverage sits inside the E&O policy, a cyber policy, or a crime/fidelity policy
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Whether the certificate of insurance clearly evidences the required coverage
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Whether the firm also has employee dishonesty / financial institution bond coverage where required
Altruist RIA Insurance Requirement
Errors & Omissions
Professional liability coverage for claims arising from advisory services, including alleged negligence, professional mistakes, fiduciary breaches, or trade errors.
Cyber Liability
Coverage for cyber events such as data breaches, phishing, ransomware, cybercriminal activity, and other technology-related threats.
Altruist’s explicit cyber liability requirement is the element most likely to create a compliance gap for RIAs adding Altruist as a second custodian.
Social Engineering
Coverage for fraud scenarios where an attacker manipulates employees, advisers, or clients into disclosing confidential information, changing instructions, or transferring funds.
Altruist frames the requirement as a combined $1 million minimum across these coverage components, rather than a separate $1 million requirement for each category.
Pershing RIA Insurance Requirements
Unlike Schwab, Fidelity, and Altruist, which have published their requirements publicly, Pershing does not publish its specific insurance requirements to the general public.
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Pershing's advisor services team is available by phone to discuss insurance requirements directly. Advisors onboarding with Pershing or reviewing their existing coverage should contact their Pershing relationship manager to confirm current requirements before purchasing or renewing a policy.
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What to ask your Pershing relationship manager
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What is the minimum E&O limit required?
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Is a financial institution bond or crime policy required?
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Is cyber liability required separately or can it be endorsed onto E&O?
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Is there a specific social engineering sublimit required?
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How should compliance be documented?
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