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Portfolio > Mutual Funds

Self-Directed 401(k) Balances Surged in Q1: Schwab

By Michael S. Fischer

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The average self-directed brokerage account balance for all participants in the Schwab Personal Choice Retirement program in the first quarter increased by 23.4% from the 2017 first quarter to $261,900, Schwab reported Friday.

SDBAs are brokerage accounts within retirement plans that participants can use to invest in stocks, bonds, exchange-traded funds, mutual funds and other securities that are not part of their plan’s core investment offerings.

The new report was based on data collected from some 137,000 Schwab retirement plan participants with current balances between $5,000 and $10 million.

Schwab data showed that in the first quarter, mutual funds received 38% of participant assets, up 1% from a year ago, while allocations to equities held steady at 29%.

Investments in ETFs stood at 17%, in cash 14% and in fixed income 2%.

Participants averaged only 2.6 trades per month, up slightly from the fourth quarter, despite high market volatility during the January-to-March period.

According to the report, large-cap mutual funds represented approximately 28% of all allocations, followed by 20% in taxable bond funds, 17% in international funds, 13% in hybrid funds and 12% in small-cap funds.

Apple was top among equity holdings at about 9% of all portfolios. As a result, information technology, at 30%, was the biggest sector holding for individual securities, followed by 15% for consumer discretionary and 13% for financials.

Utilities, real estate and telecommunication services each accounted for less than 2% of participants’ portfolios.

Among ETFs, investors allocated 47% of their dollars to U.S. equity, 18% to international equity and 13% to U.S. fixed income.

The report noted that 18.7% of SDBA accounts were managed by an independent investment advisor, with the average balance in advised accounts of $434,513. Participants held approximately 10 positions, on average, in their SDBA.

The average age of an SDBA participant was 51. Three out of five participants were male.

Baby boomers comprised 41.6% of SDBA participants, Gen Xers 40% and millennials 10.7%. The equity holdings of all three generations were similar, topped by Apple, Amazon, Facebook and Berkshire Hathaway.

— Check out How to Protect Clients’ 401(k)s in Messy Markets on ThinkAdvisor.

Michael S. Fischer

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