Banking Industry Downfalls: Addressing Common Questions

The recent turmoil in the banking industry has left investors feeling uncertain about the safety of their investments, the strength of their banking relationships, and what next steps to take, if any. With market volatility on the rise in the wake of these bank failures, the BerganKDV Wealth Management team has compiled several frequently asked questions to address potential concerns that investors may have at this time.

What is SIPC insurance?

The Securities Investor Protection Corporation (SIPC) is a non-profit organization that provides limited insurance to investors in the event that their brokerage firm fails. SIPC insurance covers up to $500,000 per account, including up to $250,000 in uninvested cash. Its primary objective is to protect against the loss of cash and securities held by a financially troubled SIPC-member brokerage firm. However, SIPC insurance does not cover losses due to market fluctuations or investments that have gone bad.

What is FDIC?

The Federal Deposit Insurance Corporation (FDIC) is an independent government agency that provides insurance to depositors if their bank fails. FDIC insurance provides coverage of up to 250,000 per depositor per bank for checking accounts, savings accounts, CDs, and money market accounts. Like SIPC insurance, FDIC insurance does not cover losses due to market fluctuations or investments that have gone bad.

How do markets play into SIPC?

According to the SIPC website, their insurance is meant to protect investors in the event that their brokerage firm fails, not in the event of market fluctuations. However, investors should monitor their investments, including annuities, CDs, municipal bonds, treasury bills, and money market mutual fund shares held in an account by the brokerage firm, as they qualify as “securities” and are subject to the $500,000 limit of protection.

If my custodian fails, what would happen?

If your custodian fails, your investments may be at risk. However, if your custodian is a member of SIPC, your investments are likely protected up to certain limits. In the unlikely event that your firm fails, you should contact SIPC to file a claim and they will evaluate your claim to determine eligibility for coverage. If approved, SIPC will pay you directly or transfer the securities to another brokerage firm on your behalf. The process of recovering your investments can be complex and may take some time. You should keep detailed records of your investments and any communications with SIPC or your brokerage firm.

Recent events in the banking industry have prompted many investors to question the safety of their investments. It’s crucial for investors to understand the insurance options available to them, including SIPC and FDIC. However, it’s worth noting that there may be unique factors that affect coverage for each individual situation. To receive personalized advice, it’s recommended to consult with a financial advisor or attorney.

At BerganKDV, we’re dedicated to helping businesses navigate the ever-changing economic and banking landscape. If you have questions surrounding the economy and banking, we invite you to join our upcoming panel-style webinar, Today’s Economy and Banking: What Every Business Owner Needs to Know, on Thursday, April 20, 2023, at 2:30 PM CDT. Our expert panelists have vast experience and knowledge in the markets, economy, banking, and business, and they will provide valuable insights that can help you make informed decisions about your next steps.

If you would like to connect with an advisor beforehand, feel free to reach out and one of our advisors would be happy to address your questions.


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The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal, or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

The views expressed are those of BerganKDV Wealth Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Investment advisory services and fee-based planning offered through BerganKDV Wealth Management, LLC, an SEC Registered Investment Advisor.

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