William M. Harris, president of WH Cornerstone Investments in Duxbury, Mass., which custodies assets at Schwab, said he pays about $6,000 annually for E&O coverage.

“While I think E&O is good industry practice, Schwab’s notice was disconcerting. What other mandates lie ahead?” Harris asked.

Daren Blonski, co-founder and managing principal of Sonoma Wealth Advisors in Sonoma, Calif., said his firm clears 100% through Schwab and carries E&O. He said operating without it “is like being a good driver and thinking you will never get in an accident.”

In addition to investors getting increasingly skittish about investment losses, regulators are cracking down on advisors with deficient cybersecurity breaches.

In August, the Securities and Exchange Commission sanctioned eight firms for failures in their cybersecurity policies and procedures that resulted in email account takeovers exposing the personal information of thousands of customers and clients. The firms included Cetera Advisor Networks LLC, Cambridge Investment Research and KMS Financial Services. The SEC levied fines and penalties on each firm ranging from $200,000 to $300,000.

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