While only 19% of participants chose and advisor, their average value, $449,552 is double that of non-advised participantsNew research from Schwab’s quarterly SDBA Indicators report, analyzing investment trends from approximately 137,000 retirement plan participants.
SAN FRANCISCO, November 27, 2018 — According to Charles Schwab’s latest SDBA Indicators Report TM, an industry-leading benchmark on retirement plan participant investment activity within approximately 137,000 self-directed brokerage accounts (SDBAs), participants who worked with an advisor had higher balances, a more diversified asset allocation mix, and less exposure to individual stocks compared to non-advised participants.
SDBAs are brokerage accounts within retirement plans, including 401(k)s 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 their retirement plan’s core investment offerings. While only 19 percent of SBDA participants chose to use an advisor, they reported an average balance of $449,552 – nearly twice as much as the $234,643 reported by non-advised participants.
In advised accounts, mutual funds continued to hold the highest percentage of participant assets at approximately 50 percent. ETFs were the second-largest allocation, followed by equities, cash and fixed income.
Conversely, non-advised participants allocated nearly 35 percent of their portfolio to individual equities. This was followed by mutual funds, cash, ETFs and fixed income.
When comparing equity holdings, both advised and non-advised participants held Apple, Amazon and Berkshire Hathaway as their top three holdings; however, non-advised participants’ positions in Apple and Amazon were nearly double compared to participants who used an advisor. Additionally, advised participants invested in more blue-chip, value companies, whereas self-directed investors allocated to more growth stocks.
“The report highlights the benefits of working with an advisor. In general, participants who had professional help were more diversified across all of their holdings. In addition, advisors typically rebalance a portfolio more often and keep their clients invested,” said Larry Bohrer, vice president, Corporate Brokerage Retirement Services at Charles Schwab. Generally, payroll contributions into SDBAs are allocated to cash. From there, it is up to the participant or advisor to invest. As the report shows, advisors kept clients’ cash allocations low, while individual investors left more of their SDBA in cash pending investment decisions.
The average SDBA account balance for all participants in the third quarter of 2018 was $265,902, up 3.5 percent from the second quarter of 2018 and up 24 percent from the third quarter of 2017;
Advised accounts averaged 9.5 trades in the third quarter compared to 5.5 trades by non-advised participants;
Baby Boomers represented the majority of advised accounts (45.4%), followed by Gen X (42.2%) and Millennials (8.5%).
About the SDBA Indicators Report TM
The SDBA Indicators Report includes data collected from approximately 137,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account®. Data is extracted quarterly on all accounts that are open as of quarter-end and meet the balance criteria.
The SDBA Indicators Report tracks a wide variety of investment activity and profile information on participants with a Schwab Personal Choice Retirement Account (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 SDBA Indicators ReportTM provides insight into PCRA users’ perceptions of the markets and the investment decisions they make.
Data contained in this quarterly report is from the first quarter of 2018, and can be found at www.schwab.com/sdbaindicators, along with prior reports.