When I buy and sell stocks, I do it through a brokerage, so the stocks aren’t owned by me directly. This creates a single point of failure for me if the brokerage goes under for some reason. I can’t imagine with billions of dollars you would tolerate that kind of single failure point, so how do these guys do it?
In: Economics
For what it’s worth, even you don’t really have a single point of failure. If your brokerage becomes insolvent, and, for whatever reason, the assets under its management are not just sold to another brokerage (which is possible, albeit ridiculously unlikely with any reputable broker, if client assets were mistakenly mixed with brokerage assets and used to pay off debts), it probably has SIPC insurance for up to $500k per account of lost assets. That would cover most retail investors. Obviously for a multimillionaire, that could still be financially devastating.
The very wealthy may benefit from using multiple brokerages to maximize SIPC coverage. However, in a lot of cases, they give their money to privately managed funds like hedge funds that would have their own way of placing orders. I’m pretty sure they generally have their own family offices that’s basically a team to manage all of their financial affairs and that family office, if it is going to invest or is holding stock outside of a professional fund, does just use a brokerage. They can mitigate risk by using several and/or using very large ones; IBKR is probably not just going to lose a few billion dollars of your money when they have hundreds of billions under management.
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