We are an independently owned and operated wealth management firm. We are not affiliated with Schwab or any other custodian. We use Charles Schwab as the primary custodian for most of our service levels.
We often receive questions from clients regarding the account protection measures provided by Schwab.
The Account Protection page on Schwab’s website explains the two levels of account protection it offers for investment accounts.
The first level includes protection for most securities and cash provided by the Securities Investor Protection Corporation (SIPC), a federally mandated, non-profit, member-funded U.S. corporation created under the Securities Investor Protection Act (SIPA) of 1970 that mandates membership of most U.S.-registered broker-dealers. SIPC provides up to $500,000 of protection for securities and $250,000 of protection for cash.
It’s important to note that SIPC protection does not cover commodity interests or cash in futures accounts and does not cover the decline in the value of securities due to bad investment advice or market fluctuations.
SIPC coverage is determined by separate capacity, meaning each account with separate capacity is eligible for the $500,000 ($250,000) coverage. For example, if a married couple has a joint brokerage account with $500,000 and each individual also has an individual brokerage account with $500,000, all three accounts are eligible for full SIPC protection. However, if a married couple has two joint accounts held at the same custodian with a combined value greater than $500,000, only the first $500,000 is protected by the SIPC.
Fortunately, Schwab provides another level of protection through Lloyd’s of London, a corporate body governed by the Lloyd’s Act 1871 and subsequent Acts of Parliament. This excess coverage becomes available in the event that SIPC limits are exhausted. Combined with SIPC coverage, Lloyd’s of London provides protection of securities and cash up to an aggregate of $600 million for all claims, with a limit of $150 million for securities and $1.15 million for cash per client.
In addition, Federal Deposit Insurance Corporation (FDIC) coverage of up to $250,000 per owner is available for all deposit accounts held at Schwab-affiliated banks. As stated in Schwab’s Trusted providers of banking services brochure , this includes:
- Bank Sweep deposit accounts for uninvested brokerage cash,
- Charles Schwab Bank High Yield Investor Checking® (linked to a Schwab One® Brokerage Account), and
- Charles Schwab Bank High Yield Investor Savings®
As a U.S. agency, the FDIC protects depositors against the loss of their deposit account in the event of the failure of an FDIC-insured bank.
These extensive account protection measures are one of the reasons we use Schwab as the primary custodian for most of our service levels.