Brokerage SIPC Coverage is 500k Max

[12knots]

Contacted the major investment brokerage where I have my traditional and Roth IRAs and I was informed that the limit on coverage is 500k. I am thinking to move one of the accounts to another brokerage to stay below 500k just for peace of mind. Anyone have thoughts on this?

[TreeLeaf]

I have thought about this but - where would I move it to for peace of mind?

[reeshau]

Did you ask them about SIPC coverage, or their coverage?

Brokerages quite often provide private insurance above SIPC levels.  Schwab, for example, has insurance through Lloyd's for up to $150M per customer, with up to $1.15M in cash.

https://www.schwab.com/legal/sipc-account-protection

[12knots]

Schwab, Fidelity, eTrade, TDAmeritrade appear to be the biggest, but all appear to mention the 500k cap.

I see a lot of commas in the sentence preceding the 150M mentioned that could skew what is meant in reference to one individual or an aggregate.

[Frankies Girl]

Fidelity has an "excess of SIPC" coverage, through Lloyd's of London.

https://www.fidelity.com/why-fidelity/safeguarding-your-accounts

[reeshau]

Schwab, Fidelity, eTrade, TDAmeritrade appear to be the biggest, but all appear to mention the 500k cap.

I see a lot of commas in the sentence preceding the 150M mentioned that could skew what is meant in reference to one individual or an aggregate.

People have complicated financial lives, and of course these are simple summaries, not actual policies or account agreements.  Your initial post seemed to worry that $500k is the limit of protection for brokerages.  I hope you see that, generally, it is not.  If your broker is not one of the popular self-directed brokerages, and really doesn't have something more, then perhaps you should leave them--at least, once your wealth exceeds their coverage.

[ATtiny85]

My understanding, or at least why I don't worry about the $500k general limit.

When I hold, for example, the mutual fund VTSAX inside my brokerage account at Vanguard, I don't really have exposure to anything. Those shares are held by a separate custodian that is audited (leap of faith there of course that the audit system works). If the Vanguard brokerage platform was hit with something that caused it to bankrupt, I still have my shares of VTSAX. They would either be sent to me or, more likely, be transferred to some replacement brokerage.

If I had my money sent blindly to Madoff Inc., which was "self-custodianed", well, that's where I would expect to have exposure that SIPC might be needed.

I have a bunch of shares of VTSAX, and I have every confidence that about 5.6% of my current balance could be traced to actual shares of Apple in some ledger on some cloud.