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As a high-net worth individual, you’ve worked hard, made smart investments, and followed a sound strategy to create a significant portfolio. But as we all know, making money is just one part of amassing wealth—keeping it is just as important. 

Asset protection for affluent families is especially critical because it requires a strategy of its own. For many investors, SIPC (Securities Investor Protection Corporation) insurance is enough to protect against the risk of default by their custodian. But for affluent families like yours, even SIPC may not provide enough protection.   

We cover the basics of standard SIPC insurance in the sidebar, but let’s walk through the additional options you need to consider to cover the risk of default over and above the limits of SIPC. 

How to get more protection 

While the SIPC is a reliable protection against failing brokerage firms, it does not fully meet the needs of affluent families and individuals whose assets exceed the limits set by the SIPC. To safeguard your wealth, consider working with a team like BWM Financial that partners only with brokerage firms that offer generous excess SIPC coverage to all clients.  

What is excess SIPC coverage? 

Excess SIPC coverage is private insurance that goes beyond the SIPC limits, often by many multiples.  This insurance is purchased by the custodian and applies to all customers. Unlike an extended warranty on your refrigerator, for example, this coverage is made available to all customers without any additional fee or opt-in. Excess SIPC insurance provides hundreds of millions or even a billion dollars in additional protection for all customers of the brokerage firm that holds it.  

How can I get excess SIPC coverage? 

Many large custodians and broker-dealers offer excess SIPC to all customers. Each company provides different limits of coverage and may have per-customer maximums, so we recommend speaking with your financial institution to understand how particular protections apply to your investments. Our team can help you secure excess coverage with one of our partner firms, all of which offer generous excess coverage to clients.  

What else can I do to protect my wealth? 

A bankrupt custodian, while a serious risk, is very rare.  Other major threats, most notably market risk and identity theft, are not covered by SIPC insurance and pose a more costly risk to affluent families.  We are uniquely focused on these challenges and can help you avoid unnecessary loss from such threats.  

Market risk 

It is crucial to understand how much risk you are taking in your investment portfolio. Losses from a drop in the stock market are much more likely to be a threat to your wealth than an insolvent brokerage firm. As a result, our team takes every step to help you understand your total investment risk and ensure it’s in alignment with your financial plan.  

A common cause of sudden, undue loss from market fluctuation is holding a concentrated position in just a single stock or industry. This doesn’t just apply to holding a company’s stock directly. Even with multiple mutual funds or ETFs (Exchange Traded Funds), investors may be surprised to find that their portfolio contains too much in one stock or industry, such as technology or financials.   

Over time, an account might also drift away from your risk tolerance. During a stock market rally, stocks increase in value and become a larger percentage of an account. This leads to sharper swings when the market corrects, catching an investor by surprise.   

To address these concerns, our team models risk in multiple accounts and financial institutions through Riskalyze. A software program designed to model investment risk, Riskalyze estimates the greatest loss you could experience over six months, 95% of the time.  While risk modeling is not a perfect science we believe this can help you to make informed decisions when it comes to asset allocation.  

If you haven’t already, you can take a Riskalyze sample quiz here. 

We also examine your investment portfolio in the context of your entire financial plan in an attempt to avoid risking more than necessary. We help you decide on a roadmap for reducing investment risk, such as rebalancing, protective options contracts, exchange funds, and more.  

Identity theft 

Another key area where we are all vulnerable is identity theft. Today’s cyber criminals have become increasingly sophisticated in personalizing attacks for each victim. Using social media, your email history, and other sources, they can craft attacks using the names of your employer, place of worship, and family members.  

At BWM Financial, we are aware of this risk and take precautions to protect you. We endeavor to build processes based on the latest research to stay ahead of hackers and keep you safe. A boutique team that knows you personally, like ours, provides additional protection against scammers.  

Guarding against identity theft also includes keeping your personal information out of the hands of scammers. Here are a few “common sense” tips to keep your information safe: 

  • Freeze your credit at all major reporting agencies (Experian, Equifax, Innovis, and TransUnion) to prevent new accounts from being opened in your name 
  • Don’t give personal information to unsolicited callers 
  • Don’t reuse the same password at multiple websites; consider a password management software to keep your login information secure 
  • Don’t click on links or attachments from suspicious senders, or send personal information over email 
  • Use multifactor authentication (a separate code by email or text message) whenever possible, particularly for logins to financial institutions  

Need help? 

There are multiple precautions that affluent families like yours should consider to protect your wealth. If you are concerned about the safety of your investments, please contact our office today. We will be happy to discuss how we can help protect your funds and provide you and your family peace of mind.  

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Investment advice offered through Stratos Wealth Partners, Ltd., a Registered Investment Advisor DBA BWM Financial.  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.