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Advised SDBAs Nearly Double Those of Non-Advised Accounts

Managed Accounts

Self-directed brokerage account participants who worked with an advisor had an average balance that was nearly twice the amount of those held by non-advised accounts, according to an industry benchmarking report. 

Charles Schwab’s latest SDBA Indicators Report analyzing investment trends from approximately 142,000 retirement plan participants who currently invest through SDBAs shows that although just 20% of SBDA participants worked with an advisor, those who did had an average balance of $448,515. This is compared to an average balance of $234,673 held by non-advised participants. 

The report, which contains data for the second quarter of 2019, also shows that advised participants averaged nearly twice the amount of trades at 9.8, compared to 5.7 trades by non-advised participants. Overall trading volume was similar to last quarter and last year, at an average of 6.5 trades per account.

By generation, Gen X represented the majority of advised accounts at nearly 44%, followed by Baby Boomers (43%) and Millennials (9.7%). 

Allocation Trends

In non-advised accounts, participants allocated one-third of their portfolios to equities, with Apple and Amazon representing nearly 17% of their allocation. Mutual funds were next, representing 32% of participant assets, followed by cash (17%), ETFs (15%) and fixed income (3%). 

For advised accounts, mutual funds remained the investment vehicle of choice, representing 50% of participant assets, followed by ETFs (23%), equities (19%), fixed income (4%) and cash (4%). 

Both advised and non-advised participants held Apple and Amazon as their top stocks. Non-advised participants, however, were much more concentrated in these positions. Additionally, non-advised participants allocated more to growth stocks, while those who worked with advisors were invested in more value-oriented companies. 

Overall, equity holdings remained similar to last quarter and to a year ago. The largest was Information Technology at 24.82%, followed by Consumer Discretionary (14.78%), Financials (10.99%) and Health Care (10.8%). A new Communication Services sector was fifth at 10.4%.

Additional Highlights

The average SDBA account balance for all participants in the Schwab Personal Choice Retirement Account (PCRA) was $276,547, up 3.3% from the first quarter of 2019 and 12.3% from the fourth quarter of 2018. On average, participants held 10 positions in their PCRA – similar to last year and the same as last quarter. 

Meanwhile, Millennials and Gen Xers again had the same percentage of mobile trades at 21%; at 16%, Baby Boomers came in slightly higher than last quarter. 

Millennials also once again had the highest percentage of cashouts of the three generations, registering at 15.7% – which, while somewhat lower than last quarter’s 16.7%, signals they still may be timid investors. The cash holdings for Gen Xers and Baby Boomers also decreased to 13.08% and 11.86% from 13.33% and 12.35%, respectively.

The Roth PCRA account holder balance was significantly lower than the non-Roth PCRA at $67,878 versus $276,547, the report notes. Gen X once again had the most Roth accounts as a percentage of accounts in their respective generations, and they were very similar to Baby Boomers in non-Roth accounts. Those with Roth accounts also had lower trade volumes at 4.1 versus 6.5.