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COLLECTED WISDOM™ on Self Directed Brokerage Accounts

Self Directed Brokerage Accounts were very popular during the bull market of the 1990's, but today only about one in five employers offer them. As a result, you don't find them being discussed much in the press or in retirement industry publications.

This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.

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ERISA Considerations in Using Brokerage Window Investing

The realm of investing employee benefit plan assets through brokerage windows remains largely uncharted territory. Fiduciaries operate under the broad understanding that ERISA Section 404(a) fiduciary duties of prudence and loyalty apply, but with little guidance on how. This 3-page article discusses the state of the law concerning brokerage windows, issues identified by the council's investigation, and ideas for how plan fiduciaries can navigate their duties in implementing or monitoring brokerage windows.

Source: Wagnerlawgroup.com, January 2023

401k Balances Reflect Volatile Period for Markets

According to Charles Schwab's SDBA Indicators Report, a benchmark on retirement plan participant investment activity within self-directed brokerage accounts, the average account balance across all participant accounts finished at $283,485 for the second quarter ending June 30, a 19% decrease year-over-year and a 15% decrease from the first quarter of 2022.

Source: Planadviser.com, August 2022

Brokerage Window Fiduciary Duties in Light of DOL Cryptocurrency Guidance

The DOL recently issued a warning about its intention to launch an investigative program into those plans that offer cryptocurrency and related products as investment options. The DOL's investigative program would include those products offered through brokerage windows, implying that plan fiduciaries might be responsible for those investments. Therefore, plan fiduciaries need to carefully consider their potential responsibilities concerning brokerage windows, both concerning cryptocurrency and investments.

Source: Hallbenefitslaw.com, June 2022

Self-Directed 401k Balances Down in Q1: Schwab Report

Reflecting recent market volatility, average self-directed brokerage account balances at Charles Schwab dropped in the first three months of 2022, down 6.25% from the end of 2021 and down 0.51% year over year.

Source: 401kspecialistmag.com, June 2022

DOL Pushes Back on Crypto, SDBA Concerns

The Department of Labor isn't backing down on its cryptocurrency concerns, but a written response to U.S. Sen. Tommy Tuberville includes some comments concerning its application to self-directed brokerage windows. The DOL's April 30 response to Tuberville's letter to Labor Secretary Marty Walsh from Acting Assistant Secretary of Labor Ali Khawar regarding the Compliance Assistance Release on cryptocurrency reiterates the motivation for the release.

Source: Napa-net.org, April 2022

DOL Issues New Cryptocurrency and Brokerage Window Guidance

Recently, the DOL issued new guidance regarding the holding or investing in cryptocurrency by 401k retirement plans. This new guidance specifically impacts retirement plans that permit participants to use self-directed brokerage accounts to trade individual stocks on their own. Under the new guidance, employers could have fiduciary responsible for participant cryptocurrency trades made through their self-directed accounts.

Source: Graydon.law, April 2022

A Higher Level of Fiduciary Oversight Could be Required for 401k Plan Brokerage Windows

Fiduciaries of 401k plans and other retirement plans know that they must prudently monitor the investment options available to participants in the plan, but are they monitoring participants' investments made through a plan's brokerage window? Recent commentary from the DOL on cryptocurrency investments suggests maybe fiduciaries should be and that the DOL may check in on that soon.

Source: Employeebenefitslawblog.com, April 2022

New Crypto Guidance Rewrites Rules on 401k Brokerage Window

New cryptocurrency guidance from the DOL threatens to upend the way regulators treat workplace retirement plans that allow participants to trade individual stocks and bonds on their own. Brokerage windows historically have been mostly off-limits to DOL regulators. That could change with the Labor Department's new playbook for cryptocurrency in 401ks.

Source: Bloomberglaw.com, April 2022

Employers Use SDBAs to Give Employees Choice

Self-directed brokerage accounts allow plan sponsors to keep their menu streamlined, while also alleviating specific investment demands from some participants. They can also help keep participants in the plan and be an avenue for offering not-so-standard investment options, but they're not right for every plan.

Source: Plansponsor.com, March 2022

ERISA Advisory Council Pulls Back the Curtain on Brokerage Windows

The ERISA Advisory Council released a detailed report on its recent examination of brokerage windows in DC plans, previously an area of controversy due to shifting guidance from the DOL. Though the council considered several topics, its sole recommendation is for DOL to conduct additional fact-finding on "brokerage window only" plans. The DOL-appointed council can't issue guidance, but these findings may help alleviate concerns for plan fiduciaries currently offering -- or looking to offer -- a brokerage window by making the case for DOL to preserve the status quo.

Source: Mercer.com, March 2022

Schwab Report: Self-Directed 401k Balances Higher

According to Charles Schwab's latest SDBA Indicators Report, the average account balance across all participant accounts finished Q4 2021 at $352,764, a 6.4% increase year-over-year and a 3.4% increase from Q3 2021.

Source: Businesswire.com, March 2022

Council Recommends More Research About "Brokerage Window Only" Plans

The ERISA Advisory Council has revisited the topic of brokerage windows in self-directed retirement plans in a recent report to Department of Labor Secretary Marty Walsh. But the Council also declined to recommend additional regulations for brokerage windows in general, saying the costs outweigh the benefits.

Source: Planadviser.com, February 2022

Considerations for Plan Sponsors Mulling SDBAs

While SDBAs provide retirement plan participants with access to numerous investment options, the resulting investments can also create potential risks to those participants and plan sponsors, according to findings from Cerulli.

Source: Asppa.org, January 2022

Plan Sponsors Eye Self-Directed Brokerage Accounts

The current environment appears ripe for self-directed brokerage accounts as certain groups of plan participants welcome the opportunity to curate retirement investments that reflect their values and priorities. By taking a fresh look at SDBAs as an investment option for their plans, sponsors will be able to harness participant enthusiasm to increase interest in and engagement with their retirement plan, according to the latest Cerulli Edge -- U.S. Retirement Edition.

Source: Cerulli.com, December 2021

Self-Directed 401k Investors Stay the Course in Q3, See Balances Increase 12.8% Year-over-Year

According to Charles Schwab's SDBA Indicators Report, a benchmark on retirement plan participant investment activity within self-directed brokerage accounts, the average account balance across all participant accounts finished Q3 2021 at $341,068, a 12.8% increase year-over-year and a 2.0% decrease from Q2 2021. The third quarter SDBA report overall showed steady investing behavior among participants.

Source: Businesswire.com, November 2021

Five Facts About Self-Directed Brokerage Accounts

Self-directed brokerage windows allow participants to establish a personal brokerage account within their employer's defined contribution plan. There are usually more investment options in brokerage windows than in the plan menu. This gives participants access to a broader array of stocks, bonds, mutual funds, and exchange-traded funds. This piece briefly reviews five facts about self-directed brokerage accounts.

Source: Alight.com, September 2021

Self-Directed 401k Balances Increase 22% Year-Over-Year

According to Charles Schwab's SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts, the average account balance across all participant accounts finished Q2 2021 at $348,183, a nearly 22% increase year-over-year and a 4.3% increase from Q1 2021.

Source: Businesswire.com, August 2021

Cold Water Thrown on Need for New Brokerage Window Guidance

Witnesses testifying before the ERISA Advisory Council largely panned the idea for additional fiduciary or disclosure obligations on DC plans that contain brokerage windows. During the two-day hearing held June 24-25, witnesses representing private companies, law firms, industry groups and other retirement plan stakeholders echoed similar themes throughout their testimony, noting, among other things, that participants who use brokerage windows are sophisticated investors familiar with the risks and that existing disclosures already inform participants.

Source: Asppa.org, July 2021

The Brokerage Option in DC Plans

This 4-page paper examines the self-directed brokerage feature in DC plans at Vanguard. Larger plans were somewhat more likely to offer the feature, and one-third of Vanguard plan participants had access to the option. Interestingly, 21% percent of plans with a brokerage option were law firms and on average, 6% of law firm plan assets were invested in brokerage.

Source: Vanguard.com, September 2021

What to Know Before Adding an SDBA to Your Plan

As more participants engage with their investments and take a more hands-on approach, sources say self-directed brokerage accounts are becoming increasingly popular. But there are pros and cons of allowing retirement plan participants to use them.

Source: Plansponsor.com, April 2021

Participant Directed Investments Through Brokerage Windows: The Last Frontier or a Trap for the Unwary?

What should fiduciaries of participant-directed plans consider in deciding whether to allow participants to direct their investments using arrangements loosely referred to as "brokerage windows"? The realm of ERISA plan investments through these arrangements remains largely uncharted territory. Fiduciaries operate under the broad understanding that ERISA Section 404(a) fiduciary duties of prudence and loyalty apply, but with little guidance on how.

Source: Wagnerlawgroup.com, April 2021

Self-Directed 401k Balances up 13% Year-Over-Year

Self-directed participants who stood pat in the face of volatility and early 2020 market lows were rewarded with solid gains, according to the latest findings from Charles Schwab's SDBA Indicators Report.

Source: Asppa.org, March 2021

Year-End 2020 Self-Directed 401k Balances Up Despite Ongoing Volatility: Schwab Report

According to Charles Schwab's SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts, the average account balance across all participant accounts finished Q4 2020 at $331,664, a 13% increase year-over-year and a 10% increase from Q3 2020.

Source: Aboutschwab.com, March 2021

SDBAs Among 2021 Benefits Trends: Fidelity

More than 20% of workplace savings plans offer an SDBA along with their other benefits, according to Fidelity internal data. The number of employers that offer self-directed brokerage accounts is up three times over 2010, the company said.

Source: 401kspecialistmag.com, January 2021


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