To maximize protection, wealthy investors may want to consider a strategy of establishing a brokerage account and purchasing brokered certificates of deposits within that brokerage account. This allows investors to spread their money among brokered CDs from various banks in a single account, with each CD being FDIC insured up to the limit. This strategy may be more convenient than opening accounts at several banks and can potentially help depositors earn more interest on those funds.
It is important to note that FDIC coverage does not apply to securities or life insurance. The Securities Investor Protection Corp. (SIPC), created under the Securities Investor Protection Act, is a nonprofit membership corporation that oversees the liquidation of a brokerage firm that is in financial trouble. If customer assets (e.g., stocks, bonds, mutual funds, etc.) are missing, SIPC protects each customer up to $500,000 for securities and cash (including a $250,000 limit for cash only).
From a client perspective, cash management is a potentially complex task. Working with an advisor can help to simplify the process and ensure that FDIC protection is maximized.
Jarrett E. Hindrew, CFP®, ChFC®, Financial Advisor