What is an FBO Bank Account?

An FBO bank account, or F/B/O (For Benefit of) account, is a kind of sub-account that is opened on behalf of the beneficiary by the entity managing their money.

This entity may be a bank, a financial institution or program manager. This helps the manager provide FDIC coverage to their clients. The FDIC does not provide insurance coverage to over $250,000 per account. When a company or business needs to hold more than that amount in an account, they risk losing this coverage. Hence, the program manager can create an FBO bank account for their client which will solve this problem.

Benefits of an FBO Bank Account

According to the FDIC:

Deposits held in different ownership categories are separately insured, up to at least $250,000, even if held at the same bank.

FDIC

For program managers, the creation of a For Benefit of bank account means they will be able to provide their clients the regulatory and insurance coverage they need. Similarly, clients also benefit from this as this means they can hold more than the limit set by the FDIC at the same bank in multiple accounts and still be insured.

You can read more about FBO bank accounts and deposit insurance here: Understanding Deposit Insurance