Increasingly, banks and investment firms are offering consumers a broad array of investment products that are not traditional deposit accounts. Many people use investment products to help buy a home, send children to college, or build a retirement nest egg. But unlike traditional checking or savings accounts, non-deposit investment products are not insured by the FDIC, even if they were purchased from an FDIC-insured bank.
This guide will help you identify non-deposit investment products that are not FDIC-insured.
- What Products Are Not Insured?
- What Does It Mean that My Investment Product is Not Insured?
- How Do I Know What Type of Product to Purchase?
- Other Scenarios Not Covered by FDIC Insurance
- How Do I File a Complaint?
What Products Are Not Insured?
There are a number of non-deposit investment products that are not insured by the FDIC, even if they were purchased from an insured bank. These include:
- Stock Investments
- Bond Investments
- Mutual Funds
- Crypto Assets
- Life Insurance Policies
- Annuities
- Municipal Securities
- Safe Deposit Boxes or their contents
- U.S. Treasury Bills, Bonds or Notes*
*These investments are backed by the full faith and credit of the U.S. government.
These products may be offered to you in a financial institution's lobby, through the mail, over the phone, or online. The value of stocks, bonds, and other securities fluctuates with market conditions; no one can guarantee that you’ll make money from your investments, and they may lose value. Each consumer should take into consideration their own financial goals, risk tolerance, and other factors when making the decision to purchase or invest in a non-deposit product.
Most often, the people selling these products are not employees or your bank, but employees of third-party securities broker/dealers or insurance companies. Whether they are making a presentation, providing you with investment advice concerning a non-deposit product, or opening an investment account for you, these sales representatives must make certain disclosures to you orally and/or in writing so you know for certain whether the product is covered by FDIC insurance. Keep an eye out for statements like:
- "This product is not a deposit or other obligation of, or guaranteed by, the bank."
- "This product is subject to investment risks, including possible loss of the principle amount invested."
- "This product is not insured by the Federal Deposit Insurance Corporation."
If you hear or read any of these statements, you will know that the product they are offering is not insured by the FDIC. These disclosures must also be included in any advertisements and other promotional materials you receive. Look for the logo below in visual media, such as TV broadcasts, webpage advertisements, ATM screens, billboards, signs, posters, and in written advertisements and brochures.
What Does It Mean that My Investment Product is Not Insured by the FDIC?
The value of your non-deposit investments can go up or down depending on the demand for them in the market, so you could lose the money you invested or not gain as much profit as you expected.
The Securities Investors Protection Corporation (SIPC) is a non-government entity that replaces missing stocks and other securities in customer accounts held by its members up to $500,000, including up to $250,000 in cash, if a member brokerage or bank brokerage subsidiary fails.
IMPORTANT: SIPC insurance does not protect an investor against the loss in value of a given investment.
How Do I Know What Type of Product to Purchase?
When shopping for a non-deposit investment product, look for one that suits your investment goals and objectives, your financial and tax status, the amount of risk you're willing to take, and the time horizon you've set for your investment portfolio.
You may want to work with a sales representative or broker/dealer to make purchases. Interview two or three sales reps or broker/dealers to compare experience, education, and professional background. Select the one who best understands your financial objectives.
Don't hesitate to provide the salesperson with this information. He or she needs to know about your financial objectives before recommending a product that suits you.
Most importantly:
- Never invest in a product that you don't understand.
- Be sure you have enough information before making an investment. Ask questions until you are satisfied.
- Understand the risks involved in your investment. Investments always entail some degree of risk.
- Know who is investing your money. Does the salesperson work for the bank or a third-party broker/dealer?
- Find out more about a sales representative or broker/dealer by contacting The Financial Industry Regulatory Authority (FIRRA) (formerly, the National Association of Securities Dealers) at www.finra.org or (800) 289-9999.
See the U.S. Securities and Exchange Commission’s Introduction to Investing for more information.
Other Scenarios Not Covered by FDIC Insurance
Safe Deposit Boxes
The contents of a safe deposit box are not insured by the FDIC. However, other insurance may be available. Read the contract you signed with the bank when you rented the safe deposit box to find out if some other type of insurance is provided; some banks may make a very limited payment if the box or contents are damaged or destroyed, depending on the circumstances.
If you are concerned about the safety, or replacement, of items you have put in a safe deposit box, you may wish to consider purchasing fire and theft insurance. Usually such insurance is part of a homeowner's or tenant's insurance policy for a residence and its contents. Again, consult your insurance agent for more information.
If the bank that holds your safe deposit box fails, in most cases, another institution will take over the failed bank's offices, including locations with safe deposit boxes. Contact the acquiring institution for information on accessing your safe deposit box. If the failed bank is not acquired by another institution, the FDIC will contact you with instructions for removing the contents of your safety deposit box.
Robberies and Other Thefts
Stolen funds may be covered by what is called a banker's blanket bond, which is a multi-purpose insurance policy a bank purchases to protect itself from fire, flood, earthquake, robbery, defalcation, embezzlement, and other causes of disappearing funds.
In any event, an occurrence such as a fire or bank robbery may result in a loss to the bank but should not result in a loss to the bank's customers.
Unauthorized access to your funds may be covered by the Electronic Funds Transfer Act and other consumer protections. If a third party somehow gains access to your account and transacts business you did not authorize, contact your bank as soon as you notice the loss to learn about their procedures for protecting your rights.
What Should I Do if I Have a Complaint?
If you have a problem or a concern with a deposit or investment, try to resolve your complaint directly with an officer of the bank or firm before involving an outside agency. If you are unable to resolve the matter with the financial institution, use the following guidelines to determine where to direct your complaint.
-
If your complaint is against a salesperson who represents a
third-party investment firm…
The Financial Industry Regulatory Authority (formerly, the National Association of Securities Dealers) -
If your complaint or inquiry is about a specific financial product or investment…
U.S. Securities and Exchange Commission (SEC)
Office of Investor Education and Advocacy -
If your complaint is about a financial institution or an employee of the financial institution, contact one of the federal agencies listed below.
For state-chartered banks that are not members of the Federal Reserve System:
Federal Deposit Insurance Corporation
Information and Support Center
(877) 275-3342 or (877) ASK-FDIC
For the hearing impaired, call 1 (800) 925-4618 or 1 (703) 562-2289 in the Washington, D.C. area
For national banks:
Comptroller of the Currency
Customer Assistance Group
(800) 613-6743 -
If the financial institution is a state-chartered member of the Federal Reserve System…
Federal Reserve Consumer Help
(888) 851-1920 phone
(877) 888-2520 fax -
If the organization that sold you the investment is not a bank…
Consumer Financial Protection Bureau
855-411-2372 (toll-free)