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The size and scope of an RIA firm directly correlate with its risk level and the potential cost of insurance premiums. Larger firms with more clients and assets under management typically face greater risk exposure due to their increased operational complexity and the potential for more significant financial losses.
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While there are currently no federal mandates requiring RIAs to carry specific types of insurance, several states do require specific types of coverage, and some of the larger brokerage firms, like Charles Schwab, require an aggregate minimum of $1 million in E&O coverage with cyber liability inclusions.
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RIA firms need a set level of coverage to mitigate the most common risks previously discussed. By investing in these five pillars, RIAs will offset most of these risks. While McGowan PRO does not carry all the insurance listed below, the McGowan family of insurance companies is vast.