2025 RIA Wire Fraud Report: Why Claims Are Denied & How to Fix Your Insurance Gaps

Wire fraud has become one of the most urgent and financially damaging risks facing Registered Investment Advisers (RIAs). Wire fraud in the RIA space refers to fraudulent transfer instructions that are typically delivered through compromised email accounts or AI-generated impersonation and cause advisors to unknowingly authorize movement of client funds. Over the past several years, advisory firms have reported dramatic increases in fraudulent wire attempts and attacks that leverage compromised inboxes, manipulated client communications, AI-generated phishing emails and deepfake voice instructions. At the same time, custodians are tightening reimbursement standards, insurers are seeing more severe claims and regulators are elevating expectations for documented cybersecurity controls.

The result is a risk environment where wire fraud and social engineering fraud are no longer a purely technical threat. It now intersects with cybersecurity, operational workflows, compliance duties, fiduciary responsibility and E&O insurance exposure. A single fraudulent transfer can trigger reputational damage, client loss, regulatory review and complex disputes among custodians, advisors and insurers.

This article explores why wire fraud risk is intensifying in the RIA space, how attackers are increasingly using AI to exploit advisory workflows, how liability is determined when funds are lost and what steps RIAs and the advisors who serve them must take now to protect their operations and their clients.

Key Takeaways (TL:DR)

• Over 80% of RIAs now rank wire fraud/social engineering as a top-3 risk — higher than cybersecurity breach (Source: Golsan Scruggs 2025 RIA Risk Survey).
• 2025 wire fraud attempts against RIAs are accelerating due to AI-driven impersonation, compromised client Gmail/Outlook accounts and hybrid-work vulnerabilities.
• Custodians often deny reimbursement for fraudulent wires when advisors cannot demonstrate that required verification procedures were followed.
• E&O, cyber liability and fidelity bonds must be aligned to address social engineering and funds-transfer fraud; no single policy protects against every scenario.
• Regulators now expect RIAs to document controls, train staff and clients and maintain verifiable incident-response workflows for wire-fraud and cybersecurity events.

The Evolving Landscape of Wire Fraud for RIAs

Wire fraud and social engineering fraud in the RIA industry are rising due to a convergence of operational shifts, new attacker capabilities and increasing regulatory expectations. Advisory firms today operate in highly digital, fast-paced environments where client communication is often informal, immediate and conducted primarily via email. Fraudsters take advantage of this cadence, studying communication patterns and inserting themselves at opportune moments.

Why the risk is accelerating

Hybrid work models make fraud easier. Fewer in-person touchpoints mean employees are more reliant on email, instant messaging and CRM notes to validate instructions. Inboxes, not conversations, become the primary communication source. This shift creates an ideal environment for attackers who monitor and manipulate digital interactions.

At the same time, clients (particularly high/ultra-high-net-worth individuals) expect rapid responsiveness from their advisors. Fraudsters exploit this urgency, imitating legitimate requests and creating time pressure that encourages shortcuts in verification.

Taken together, these shifts reduce the natural friction that once protected advisors from fraudulent requests, increasing the likelihood that a single missed step can lead to a loss.

The bottom line: Hybrid work, inbox-based communication and rising client urgency have created ideal conditions for attackers to impersonate clients and override standard controls.

Claim trends and insurer insights

Industry data shows a substantial increase in wire-fraud frequency and severity across RIAs of all sizes. Fraudsters rely on increasingly sophisticated tactics: spoofed email domains that differ by a single character, intercepted and altered email threads and high-pressure instructions timed during client travel or market volatility.

Insurers report that losses often stem from small procedural gaps, such as failing to conduct a callback or relying on a client’s personal email address rather than a verified phone number. Because many E&O and cyber policies hinge on procedural adherence, insurers frequently scrutinize whether the firm followed its own written policies before determining coverage. These insurer findings make clear that even minor deviations from documented procedures can determine whether coverage applies.

Regulatory pressure and compliance expectations

Regulators have made clear that RIAs must treat wire-fraud prevention as a supervisory responsibility—one directly tied to compliance. The SEC’s Cybersecurity Rule requires firms to maintain written cybersecurity policies, conduct ongoing risk assessments and create documentation around incident handling. Advisors must be able to demonstrate both preventive and reactive controls.

FinCEN’s proposed AML/BSA rule for RIAs further signals that regulators expect wealth managers to monitor and respond to transactional anomalies. Taken together, these developments elevate fraud-mitigation standards across the advisory industry and reinforce the need for rigorous verification procedures. In practice, this means advisors must be able to demonstrate their controls just as clearly as they describe them—regulators increasingly expect real evidence, not just written intent.

What’s New for 2026

The regulatory environment for RIAs will tighten further in the coming years as the SEC finalizes additional cybersecurity reporting expectations and begins active enforcement of its newly adopted Cybersecurity Rule. At the same time, anticipated updates to the proposed FinCEN AML/BSA rule are delayed until January 1, 2028, but are expected to expand advisor obligations related to transaction monitoring, identity verification and the documentation of anomalous requests—including suspicious wire-transfer activity. Together, these shifts signal an environment in which RIAs will face higher scrutiny over how they authenticate client instructions, supervise staff and demonstrate effective incident-response planning. In fact, some RIAs are already being asked about preparation in exams and underwriting.

How Wire Fraud Actually Occurs Inside RIA Firms

Wire fraud typically begins not with a dramatic breach but with subtle manipulation of everyday systems and workflows. In many cases, fraudsters compromise a client’s personal email account and monitor communications quietly for days or weeks. Once they understand the advisor’s communication patterns, they insert fraudulent instructions into ongoing threads.

Common attack vectors and manipulation tactics

Attackers use techniques such as domain spoofing, altered PDF forms, fake custodial messages, manipulated email threads and new AIS-crafted message variants that blend seamlessly into existing correspondence. These attacks exploit the trust inherent in advisor-client relationships and the speed at which advisory teams are expected to operate.

Where liability falls between the advisor, client and custodian

When a fraudulent wire is released, liability is not always straightforward. Many advisors assume custodians will absorb losses, but custodians frequently deny reimbursement unless their own systems were compromised—an extremely rare event. More commonly, custodians point to the RIA’s failure to follow documented verification procedures.

Clients may then assert that the advisor breached their fiduciary duty by not protecting their assets. This can trigger negligence claims, “failure to supervise” allegations and E&O exposure. Because liability often depends on operational behavior, documentation becomes crucial to determining who is responsible.

When (and why) insurance disputes arise

Insurance disputes often arise because wire-fraud scenarios rarely fall neatly within the boundaries of a single policy. If the advisor voluntarily initiated the transfer—even if based on fraudulent instructions—E&O policies may exclude coverage for voluntary parting of funds. Cyber policies may only respond when unauthorized system access is involved. Fidelity bonds or cyber policies with social engineering endorsements provide clearer protection but still require strict adherence to documented procedures. Gaps often become apparent only after a loss.

Fidelity bonds, offered through Surety Solutions under NAPA Premier co-branding, protect RIAs from fraudulent instruction, employee dishonesty, forgery, computer fraud and certain forms of wire-transfer fraud.

How AI Is Intensifying Wire Fraud Risk for RIAs

Artificial intelligence is accelerating the evolution of wire fraud. Attacks once identifiable through typos, awkward phrasing, or suspicious timing are now polished, personalized and almost indistinguishable from legitimate communication.

AI-generated phishing and email manipulation

Generative AI tools allow attackers to replicate a client’s writing style, language and formatting with striking accuracy. Fraudsters scrape legitimate email threads from compromised accounts, rewrite messages with altered instructions and embed them within authentic-looking conversation histories. This makes detection significantly harder, even for experienced advisors.

Deepfake voice fraud targeting advisors

Voice cloning has emerged as one of the most alarming developments in financial-services fraud. With only a few seconds of audio sourced from social media, webinars, or voicemail greetings, attackers can create highly convincing voice messages that sound identical to a long-standing client. These deepfake requests are often designed to exploit emotional urgency, prompting employees to bypass verification steps they would otherwise follow.

AI-driven operational errors within RIA workflows

AI tools used within RIA firms can inadvertently introduce new risks. Automated assistants may summarize client instructions incorrectly, produce draft messages with inaccuracies, or trigger workflow actions that mimic—but do not actually reflect—client intent. Without clear policies governing AI usage and supervision, firms may face liability when automated processes contribute to erroneous transfers.

How insurers are adapting underwriting for AI risk

Recognizing AI’s impact on wire fraud, insurers are updating underwriting questionnaires to ask how RIAs use automated tools, how employees are trained to identify AI-driven attacks and whether AI-generated communications are subject to human review. Firms with weak AI governance may face higher premiums, restricted coverages, or changes in underwriting appetite.

Together, these AI-driven risks make fraudulent instructions harder to detect and widen the gap between a firm’s perceived and actual verification safeguards.

Risk Exposures and Insurance Coverage Gaps

Wire fraud risk sits at an intersection where multiple forms of insurance may apply—or may not apply at all. Understanding these gaps is essential for RIAs, especially as carriers tighten underwriting standards.

Does Your Policy Cover Wire Fraud?

Why E&O, cyber and fidelity bonds behave differently

E&O insurance addresses professional negligence but often excludes voluntary parting of funds. Cyber liability insurance typically requires evidence of unauthorized system access, which may not occur in email-based fraud. Social engineering endorsements offer broader protection but only when specifically purchased and only when firm procedures are followed consistently.

The role of social engineering and funds-transfer fraud endorsements

Social engineering coverage has become increasingly essential for RIAs. These endorsements cover losses resulting from fraudulent instructions that appear legitimate—a scenario that represents a significant share of modern wire-fraud attempts. Funds-transfer fraud coverage, payment instruction fraud and computer fraud coverage each address specific parts of the fraud chain. RIAs often require a combination of these endorsements, not a single add-on.

The bottom line: No single policy covers all wire-fraud scenarios—RIAs must coordinate E&O, cyber liability and fidelity bonds to avoid gaps that emerge during a claim.

Common reasons wire-fraud claims are denied

Claims are most commonly denied because:

• The firm deviated from its written verification procedures
• The instruction was processed without a callback
• A client’s personal email was compromised—but no unauthorized system access occurred
• The wrong policy was expected to respond
• Coverage limits were insufficient relative to client asset levels

The cumulative effect of these breakdowns is that responsibility shifts back onto the advisory firm, even when the fraud originated outside its systems. These denials underscore the need for integrated coverage planning and procedural discipline.

Preventive Controls and Best Practices for RIA Firms

Preventive controls are essential because wire fraud often exploits gaps in human behavior rather than system weaknesses. RIAs must combine policy, training and technology to reduce exposure.

Strengthening internal verification procedures

The strongest safeguard against fraudulent transfers is a well-structured verification process. Clear procedures must require multi-step verification for all wire requests, including callbacks to verified phone numbers, authentication questions and exclusive use of secure channels for sending or receiving sensitive information. These procedures should be documented, trained and audited.

• Require out-of-band verbal confirmation using a pre-established phone number (never the number in the email signature) for every wire or distribution request over $50,000 — no exceptions, even for long-standing clients who are “traveling” or “in a meeting.”

Elevating employee and client training

Employees need more than generic phishing awareness. They require training that covers RIA-specific fraud scenarios, demonstrates AI-generated attack methods and walks through real-world examples of manipulation. Clients should also understand the firm’s policies and know which communication methods are permitted—and which are not.

Implementing technology safeguards

Strong technical controls—including DMARC/SPF/DKIM authentication, MFA, secure client portals, endpoint monitoring and encrypted communication systems—form the backbone of fraud prevention. These systems reduce the likelihood of compromise and strengthen the firm’s ability to detect suspicious patterns.

Preparing for fast-response incident handling

Even the best controls cannot stop every attack. When fraud is suspected, RIAs must act immediately: contact custodians, freeze accounts if possible, preserve evidence and notify insurers within required time frames. Under the SEC Cybersecurity Rule, firms may also have reporting obligations depending on the severity of the incident.

How NAPA Premier Helps Advisors Mitigate Wire Fraud Risk

Wire fraud risk is evolving quickly, and advisory firms need more than insurance—they need guidance from partners who understand RIA workflows, custodial expectations and how insurers evaluate controls. As the dedicated insurance resource for RIAs, NAPA Premier helps advisors strengthen their protection by reviewing their operational environment, identifying where gaps exist and structuring coverage that responds to the way advisory firms work.

What Advisors Can Expect During a NAPA Premier Consultation

When an advisor meets with NAPA Premier to review wire-fraud exposure, we evaluate the operational, procedural and insurance-related factors that most influence claim outcomes. These typically include:

• How the firm verifies wire instructions and whether callback procedures match custodian requirements
• Whether documentation habits support the advisor’s stated procedures
• Exposure to social engineering and fraudulent instruction attacks
• How the firm’s AI tools, communication channels and CRM workflows may introduce verification risks
• Whether the advisor’s E&O, cyber liability and fidelity bond complement each other without leaving gaps

This review helps advisors understand where their controls are strong, where additional support is needed and how insurers are likely to interpret the firm’s environment if a claim occurs.

How NAPA Premier Structures Coverage for Wire-Fraud Scenarios

NAPA Premier does more than place policies. We help advisors understand how each policy responds during a wire-fraud event and ensure that the coverage components work together.

That includes:

• Aligning E&O policies with the firm’s documented procedures and supervisory structure
• Reviewing cyber liability policies for social engineering endorsements that match the RIA’s risk profile
• Ensuring the firm’s fidelity bond—available through Surety Solutions under the NAPA Premier program—includes protection for fraudulent instruction, forgery and computer fraud
• Confirming that limits and sublimits reflect the type of clients the advisor serves and the size of typical transfer requests

This approach helps advisors avoid the most common denial triggers—voluntary parting exclusions, missing verification documentation and lack of unauthorized-system-access evidence.

The Value of RIA-Specific Insight

Several insurance products can appear similar on the surface, yet RIAs require precise combinations of coverage due to custodial workflows, client communication patterns and the high stakes of fraudulent transfers. NAPA Premier’s insight into these dynamics helps advisors avoid unintended exposure and gives them clearer expectations about how coverage performs during real-world events.

Conclusion

Wire fraud and social engineering fraud are no longer an occasional threat. It is a persistent and rapidly evolving risk that directly impacts an RIA’s operational integrity, fiduciary duty and insurance exposure. As attackers harness AI to create highly convincing communications, advisory firms must strengthen verification procedures, reinforce staff and client education, invest in secure technology and scrutinize their insurance programs for coverage gaps.

RIAs that take a proactive, integrated approach—supported by insurance partners who understand the complexities of advisory workflows—will be better positioned to protect their clients, maintain regulatory compliance and preserve the trust that defines their profession.

FAQ Section — Wire Fraud Risk for RIAs

1. What is the average wire fraud attempt size targeting RIAs in 2025?

Losses frequently exceed $1 million, with some attempts over $9 million. Ultra-high-net-worth client relationships remain the primary target (Golsan Scruggs 2025 RIA Risk Survey).

2. Do custodians reimburse RIAs for fraudulent wire transfers?

In nearly every case, no — unless the custodian’s own internal system was breached (extremely rare). Schwab, Fidelity and Pershing uniformly place responsibility on the advisor to follow documented verbal confirmation procedures.

3. Will standard E&O insurance pay for a fraudulent wire loss?

Usually not. Most E&O policies contain a “voluntary parting” exclusion. Coverage typically requires a specific social engineering or funds-transfer fraud endorsement on a policy, for example.

4. How are RIAs most commonly targeted in wire fraud schemes?

RIAs are most commonly targeted through compromised client email accounts and sophisticated social-engineering attacks that mimic legitimate communication. Once inside a client’s inbox, attackers monitor advisor-client conversations and insert fraudulent wire instructions that appear authentic. These schemes often use lookalike email domains, manipulated PDF forms and AI-generated messages to bypass informal verification processes.

5. Does E&O insurance cover losses from wire fraud for RIAs?

E&O insurance may cover wire-fraud losses only when the incident involves a professional service error, but many policies exclude voluntary parting of funds. In most fraudulent wire cases, coverage depends on the presence of a social engineering endorsement rather than E&O alone. RIAs need an integrated insurance structure—E&O, cyber liability and fidelity bonds—to properly address all fraud scenarios.

6. Why do custodians often deny reimbursement for fraudulent wire transfers?

Custodians often deny reimbursement because the fraudulent instructions appear consistent with the RIA’s usual process or because the advisor did not follow required verification procedures. Most custodians guarantee safety only for unauthorized internal system breaches—not client email compromises. As a result, advisors are typically responsible for demonstrating they followed documented callback and identity-verification procedures.

7. How is AI increasing the risk of wire fraud for financial advisors?

AI increases wire-fraud risk by enabling attackers to generate highly realistic phishing messages and deepfake voice instructions that closely resemble a client’s communication style. Fraudsters can replicate tone, vocabulary and audio patterns with minimal data, making fraudulent instructions significantly harder to detect. This elevates operational risk and introduces new underwriting scrutiny around AI governance within RIA firms.

8. What verification procedures should RIAs use to prevent fraudulent wires?

RIAs should verify every wire request using a callback to a previously verified phone number and avoid relying solely on email for transactional instructions. Strong verification also includes secure client portals, multi-factor authentication and authentication questions known only to the client. Regulators and insurers increasingly expect RIAs to document and audit these procedures regularly.

9. What type of insurance best protects RIAs from wire fraud losses?

Fidelity bonds with social engineering or fraudulent instruction protections provide the most direct coverage for deceptive wire-transfer losses. Cyber liability may respond when unauthorized system access occurs, and E&O applies only when a professional error contributes to the loss.

10. How should RIAs respond if they suspect a fraudulent wire request?

RIAs should immediately contact the custodian to attempt to halt or reverse the transaction, then document the incident and notify their insurer within required timelines. Firms should also secure affected accounts, preserve communication evidence and follow their incident-response and regulatory reporting procedures. Rapid response significantly increases the chance of mitigating losses.

11. What role do insurance advisors play in helping RIAs manage wire fraud risk?

Insurance advisors help RIAs structure coverage across E&O, cyber and fidelity bond policies to minimize gaps and prepare underwriting-ready descriptions of fraud controls. Advisors also provide education on emerging risks—such as AI-driven impersonation—and assist firms in strengthening their verification procedures. Their insight is essential as carriers tighten standards around social engineering and funds-transfer fraud.