RIA Litigation & E&O Rate Surge: Private Assets, Fiduciary Claims & How to Protect Your Firm

Key Insights (TL;DR)

Litigation risk for RIAs is rising in 2026 as private-market allocations expand, fiduciary expectations intensify and regulatory scrutiny increases. Clients now expect flawless communication, transparent fees and documented rationale for every decision — creating more opportunities for disputes. E&O rates are rising accordingly, particularly for firms using private credit and alternatives. Strengthening documentation, disclosures, supervision and coverage structure can help RIAs reduce their exposure in this rapidly evolving risk environment.

• E&O rates for RIAs with private-market exposure rose 18–35% in 2025 and are projected to rise another 12–25% in 2026 (WTW Insurance Marketplace Realities 2026).
• Private/alternative investments now drive 30%+ of E&O claim severity — up from <10% five years ago (Golsan Scruggs 2025 RIA Risk Survey).

The RIA industry is entering one of the most litigious periods it has ever faced. As markets shift, private assets proliferate and client expectations rise, advisors are confronting a new risk landscape defined by heightened scrutiny, increased regulatory enforcement and a surge in client disputes. At the center of this shift are three converging forces: rising E&O insurance rates, expanding fiduciary obligations and complex exposures tied to private-market investments.

For advisory firms, especially those serving affluent or sophisticated clients, the challenge is not merely avoiding errors but navigating an environment where perception, documentation and expectations now carry as much weight as portfolio performance. This article explores why litigation risk is rising for RIAs, what’s driving rate hikes, how private assets amplify liability and what wealth managers must do to protect their firms in 2026.

Why Litigation Risk Is Rising for RIAs in 2026

Litigation against RIAs has become more frequent and more severe. Clients today have unprecedented visibility into their accounts, instant access to performance data and heightened expectations of personalized guidance. When markets are volatile or private investments behave unexpectedly, RIAs often become the first party clients turn to for accountability.

Clients expect perfection, not just prudence

Modern clients often interpret advisory relationships as insulated from mistakes, ambiguity or market complexities. They expect explanations for every allocation, every movement and every change in performance — and when those explanations feel inadequate, allegations arise.

Sophisticated clients, especially in the HNW and UHNW space, are increasingly litigious. They also tend to be better resourced, better connected and more comfortable engaging legal counsel when dissatisfied.

Fee transparency and value disputes have escalated

Clients have greater access to fee information than ever. Custodial dashboards, performance comparison tools and digital platforms allow them to benchmark advisory fees easily. Even minor discrepancies in fee billing, expense allocation or wrap-fee disclosures can lead to disputes.

Market complexity magnifies misunderstandings

With private credit, interval funds, SMAs, structured notes and thematic portfolios becoming mainstream, mismatches between expected and actual performance create fertile ground for disputes. Clients often interpret poor results as advisor error rather than inherent market risk.

The bottom line: Litigation risk is rising because client expectations are outpacing advisory documentation and communication — widening the gap between perceived and actual advisor responsibility.

Growing Fiduciary Pressures on RIAs

Fiduciary expectations have evolved far beyond basic suitability. Regulators and clients expect RIAs to proactively identify risks, anticipate conflicts and ensure advice remains aligned with client goals under all market conditions.

Clients interpret fiduciary duty broadly

Even though the legal definition of fiduciary duty is well-established, clients often apply their own expectations. Many assume the advisor has responsibility for:

• anticipating downturns
• preventing emotional decisions
• managing tax implications
• explaining liquidity restrictions
• integrating estate or business planning considerations

When expectations diverge from the advisory agreement, disputes follow.

Conflicts of interest remain a litigation driver

Disclosure failures — or the perception of incomplete disclosure — drive many fiduciary claims. Even fully disclosed conflicts can be problematic if clients feel they were not meaningfully explained.

Documentation is now critical evidence

Fiduciary claims often hinge on what was documented, not what was said. Advisors who rely on verbal conversations without written follow-up are increasingly vulnerable.

How Private Assets Are Increasing RIA Liability

The rapid rise of private-market allocations has added significant complexity. While these investments offer diversification and income opportunities, they also introduce new areas of exposure that RIAs must navigate carefully. Coverage availability depends on whether the underlying investments fall within the scope of the advisor’s E&O policy and certain strategies may be excluded under programs such as NAPA Premier.

Valuation opacity creates disputes

Unlike public markets, private investments rely on periodic valuations that can lag reality. Clients may interpret declining values or sudden write-downs as advisor mismanagement, even when the advisor acted appropriately.

Liquidity constraints surprise clients

Many disputes arise when clients discover they cannot redeem private investments during periods of need. Even if the advisor explained the constraints verbally, lack of documentation often shifts liability back to the firm.

Due diligence expectations have expanded

RIAs must now demonstrate not only that they reviewed an offering, but that they evaluated the manager, strategy, liquidity profile and risk factors thoroughly. Clients increasingly expect institutional-level due diligence.

Concentration and suitability issues escalate quickly

Private assets that grow to outsized positions can trigger claims, particularly if the client experiences losses or needs access to capital unexpectedly.

The bottom line: Private assets amplify liability because clients often misunderstand liquidity, valuation and risk — and documentation rarely captures the full depth of those conversations.

Regulatory and Compliance Trends Making RIAs Nervous

Regulatory bodies have intensified oversight across cybersecurity, fee billing, conflicts of interest and private-market disclosures. These areas are now focal points during SEC exams and trigger a significant portion of advisory disputes.

The SEC’s continued enforcement push

The SEC has increased its enforcement actions in areas such as:

• valuation practices
• inaccurate or misleading performance reporting
• undisclosed conflicts
• wrap-fee arrangements
• misaligned expenses
• cybersecurity vulnerabilities affecting client data

Even advisory firms with strong compliance programs can face headaches when documentation does not match actual practices.

Cybersecurity expectations now bleed into fiduciary issues

A cyber incident can trigger not only cybersecurity obligations but also fiduciary-based claims if clients believe the advisor failed to safeguard sensitive information or if an incident disrupts trading or reporting accuracy.

Fee and billing disputes are increasingly common

Regulators now routinely request detailed fee documentation and billing methodology. Small inconsistencies can escalate into large claims or forced remediation.

The bottom line: Regulatory expectations have shifted from basic compliance to demonstrable supervision — and any gap between written procedures and real workflows invites scrutiny.

Why E&O Rates Are Rising for Advisory Firms

E&O insurance for RIA carriers has increased scrutiny across the advisor segment and rates have risen accordingly, particularly for firms with private-market exposure, HNW client bases or complex fee arrangements.

Claims severity is increasing

When disputes arise, they often involve large account balances, especially for UHNW clients. Defense costs alone can exceed $100,000 in routine cases.

Private assets are a major underwriting concern

Underwriters are increasingly cautious about the valuation, documentation and liquidity risks associated with private-credit and private-equity products.

Cyber-related supervisory failures bleed into E&O claims

Likewise, supervisory negligence tied to cyber events may fall under E&O, which is a trend underwriters consider when evaluating risk. It is critical for RIAs to note that E&O policies explicitly exclude losses from fraudulent wires (often referred to as a “voluntary parting” exclusion). Fraud-related transfer losses are typically addressed through a fidelity bond or other specialized fraud protection rather than standard E&O coverage. Cyber incidents themselves are generally addressed through cyber liability insurance, which operates separately from E&O.

Note: Fidelity bonds are not issued or placed by NAPA Premier; advisors are referred to Surety Solutions, an independent partner.

New regulations mean more discovery risk

The more documentation regulators require, the more opportunities exist for inconsistencies that fuel litigation.

How RIAs Can Strengthen Their Risk Posture in 2026

RIAs cannot control market conditions or client expectations, but they can proactively strengthen supervision, communication and documentation. These practices help prevent disputes — and protect the firm if litigation occurs.

Strengthen documentation across the client lifecycle

Every key conversation should be memorialized. This includes risk discussions, liquidity warnings, allocation rationale and expectation-setting.

Specifically, RIAs should develop and utilize a Private Assets Acknowledgement Form that clients sign before allocating funds. This document must clearly memorialize the client’s understanding of the investment's liquidity constraints (i.e., inability to redeem quickly) and the risks of valuation opacity. This step closes the documentation gap that fuels most private-asset disputes.

Enhance disclosures with plain language

Clients often ignore technical disclosures. RIAs must ensure clients truly understand the constraints and risks of private assets.

Focus on supervisory consistency

As firms grow, supervision must evolve. Clear oversight of junior advisors, operations staff and investment decisions reduces exposure.

Adopt a proactive communication cadence

Clients who feel informed are less likely to pursue litigation. Regular updates, especially during periods of volatility, help align expectations.

How NAPA Premier Helps RIAs Navigate Litigation Risk

As the insurance partner for RIAs, NAPA Premier helps firms understand how litigation trends intersect with E&O coverage structure, underwriting expectations and policy exclusions. Our role is to help advisors align real-world operations, documentation practices and disclosure discipline with how coverage may respond when disputes arise.

Educating RIAs on coverage boundaries

RIAs frequently misunderstand where E&O ends and where cyber liability, fiduciary liability, management liability and fraud-related protections begin. NAPA Premier helps advisors understand these boundaries so they can set realistic expectations and avoid coverage surprises.

Preparing firms for underwriting intensity

Underwriters now look closely at:

• private-market exposure
• fee and billing structures
• conflict-of-interest disclosure processes
• cybersecurity readiness
• supervisory systems

NAPA Premier helps RIAs present these elements with clarity and consistency during underwriting review.

Creating long-term risk strategies

Insurance reviews should evolve as advisory workflows change. NAPA Premier helps RIAs revisit underwriting assumptions, documentation controls and coverage structure as litigation trends and regulatory expectations shift.

¹Note: Fidelity bonds are not issued or placed by NAPA Premier; advisors are referred to Surety Solutions, an independent partner.

90-Day Litigation-Resilience Checklist for RIAs

RIAs can reduce litigation risk over the next quarter by focusing on:

• Strengthening documentation and IPS processes
• Reviewing private-market disclosures
• Conducting a fee-billing audit
• Testing cybersecurity and incident-response workflows
• Updating supervisory policies
• Scheduling an annual E&O and coverage review with an RIA-focused insurance partner such as NAPA Premier

These steps create a strong defense both before and during potential claims.

Conclusion

Litigation risk for RIAs is increasing as markets evolve, private assets proliferate and regulatory expectations rise. By strengthening documentation, clarifying client communication, improving supervisory practices and maintaining a robust E&O program, RIAs can reduce exposure and position themselves for long-term resilience. With the right risk-management strategy — and the right insurance partners — advisors can navigate 2026’s complexities with confidence.

FAQ — RIA Litigation Risk and E&O

1. Why is litigation risk increasing for RIAs in 2026?

Litigation risk is rising due to market volatility, private-asset expansion, stricter regulatory enforcement and heightened client expectations around performance and communication.

2. How do private assets increase RIA liability?

Private investments involve opaque valuations, liquidity constraints and complex disclosures — all of which can lead to disputes if not communicated clearly and documented thoroughly.

3. Why are E&O rates going up for advisory firms?

Underwriters are responding to increased claim severity, as more disputes tied to alternative investments and supervisory failures linked to cyber incidents and documentation gaps.

4. What are the most common litigation triggers for RIAs?

Fee disputes, suitability concerns, misrepresentation allegations, valuation disagreements, conflicts of interest and documentation deficiencies.

5. How can RIAs reduce litigation exposure?

Improve documentation, enhance disclosures, supervise consistently, communicate proactively and maintain a well-structured E&O program.

6. Does E&O cover private-market investment disputes?

Coverage availability depends on whether the underlying investments fall within the scope of the advisor’s E&O policy, and certain strategies may be excluded under programs such as NAPA Premier.

7. How can RIAs work with their insurance program to reduce litigation risk?

NAPA Premier helps RIAs review coverage structure, prepare for underwriting scrutiny, identify gaps between operations and policy terms and understand how evolving risks may affect claims exposure. Coverage decisions remain subject to policy terms and insurer determination.

8. How often should RIAs review their E&O and risk controls?

Annually at minimum — but firms with significant private-market exposure or rapid growth should review coverage quarterly.