Self-Directed Brokerage Account Management

For many years, the investment options offered in company-sponsored retirement plans were limited to a pre-selected list of mutual funds and annuity contracts. However, thousands of employers have enhanced their retirement plans to include a brokerage window opportunity so that plan participants have more choice and greater flexibility with their retirement investments. This option, known as the Self-Directed Brokerage Account (SDBA), exists in 401(k), 403(b), or 457 plans where participants have access to stocks, bonds, mutual funds and ETFs.

Not only do brokerage accounts allow investors to choose from a vast array of investment options and expand the range of investment choices beyond their core investments, they can now have professional management advise on those assets.

According to Aon Hewitt, approximately 40% of retirement plans offer SDBAs. Hewitt also found that only around 3% to 4% of retirement plan participants with access actually use this option. Retirement savers using these accounts generally have higher incomes and higher plan balances, with the average account balance falling just under $250k.

That means, for advisors looking to grow their practice, SDBA is the ideal client acquisition strategy.

We know that in some cases, too many options can actually hinder participation rates in 401(k) plans. Given that, a growing number of plan participants are seeking professional investment advice on their workplace retirement accounts. For the financial advisor, that means the opportunities to turn assets under influence (AUI) into assets under management (AUM) are limitless.

A self-directed brokerage account is an option that opens up access to a network of mutual funds. Some SDBAs may allow investments in stocks, bonds, and exchange-traded funds, as well. When retirement savings are placed in an account like this, investments are allocated to investments apart from those available in the core plan.

GREATER FLEXIBILITY

The self-directed brokerage account gives investors access to a wider range of investment choices than the default ones presented in the plan. If your client is unimpressed or dissatisfied with the investment choices available in their retirement plan, check to see if a self-directed 401(k) is available. It could be a viable alternative rather than settling for the core investment lineup.

The accounts may come in the form of a "mutual fund window" providing access to thousands of funds to choose from. Some plans give investors access to a more flexible “brokerage window” account that may allow you to invest in mutual funds, exchange-traded funds, and even individual stocks and bonds. The main concept is to give more choices to a more hands-on investor.

Limited core investment options turn to greater choice, flexibility, and access to financial advice:

Our Self-Directed Brokerage Account investment options are available through a variety of custodians: