Retirement plan participants with self-directed brokerage accounts (SDBAs) who work with a financial advisor had an average plan balance of $448,515—nearly twice as much as the $234,673 held by non-advised participants.
Pretty good argument for working with an advisor, eh?
Unfortunately, only 20% of SDBA participants actually do work with an advisor, according to the Q2 2019 Charles Schwab SDBA Indicators Report, a benchmark on retirement plan participant investment activity within approximately 142,000 self-directed brokerage accounts (SDBAs) with balances between $5,000 and $10 million in a Schwab Personal Choice Retirement Account (PCRA).
SDBAs are brokerage accounts within retirement plans, including 401ks and other types of retirement plans, which participants can use to invest in stocks, bonds, exchange-traded funds, mutual funds and other securities that are not part of the plan’s core investment offerings.
Allocation trends
In non-advised accounts, participants allocated one-third of their portfolios to equities, with Apple and Amazon representing nearly 17% of their equity allocation. Mutual funds were next, representing approximately 32% of participant assets, followed by cash, ETFs and fixed income.
In advised accounts, mutual funds remained the investment vehicle of choice, representing approximately 50% of participant assets. ETFs were the second-largest allocation, followed by equities, cash and fixed income.
Both advised and non-advised participants held Apple and Amazon as their top stocks, but the report found non-advised participants were much more concentrated in these positions (5.88% advised vs. 9.54% non-advised for Apple; 3.75% vs. 7.13% for Amazon). Next up for advised accounts was Microsoft at 3% and Berkshire Hathaway at 2.74% while non-advised accounts swapped the third and fourth positions to Berkshire Hathaway at 2.51% and Microsoft at 2.15%.
Additionally, the report found non-advised participants allocated more of their holdings to growth stocks, while those with advised self-directed brokerage accounts were invested in more value-oriented companies.
More highlights
- The average SDBA account balance for all participants in the second quarter of 2019 was $276,547, up 3.3% from the first quarter of 2019 and up 12.3% from the fourth quarter of 2018
- Advised accounts averaged 9.8 trades in the second quarter, compared to 5.7 trades by non-advised participants. Overall trading volume was very similar to last quarter and last year
- Gen X represented the majority of advised accounts (43.9%), followed by Baby Boomers (43%) and Millennials (9.7%).
The SDBA Indicators Report tracks a wide variety of investment activity and profile information on participants with a Schwab PCRA, ranging from asset allocation trends and asset flow in various equity, exchange-traded fund and mutual fund categories, to age trends and trading activity.
The report provides insight into PCRA users’ perceptions of the markets and the investment decisions they make. Data contained in this quarterly report is from the second quarter of 2019, and can be found at www.schwab.com/sdbaindicators, along with prior reports.