Administration November 6, 2004

SDBAs Still More A Guy Thing

June 23, 2003 (PLANSPONSOR.com) - There are significant differences between the way men use a self-directed brokerage account (SDBA) than women including the fact that three times as many men are SBDA users and that men hold on average $56,000 more in account balances.
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According to a report from Charles Schwab Corporate Services based on the study of about 65,000 401(k) participants investing through Schwab’s Personal Choice Retirement Account (PCRA), f irst quarter 2003 data shows that Schwab SDBA users tend to invest conservatively regardless of gender, but that women behave more conservatively than men. Specifically:

  • on average, women held about 1.5 fewer positions than men (5.4 vs. 6.9) and made fewer trades (1.4 vs. 2.1)
  • first quarter net flows into cash and equivalents were 29% for women, compared to a net outflow of 6% for men
  • first quarter net flows into mutual funds and equities for men were 61% and 26% respectively, compared to 39% and 14% respectively for women
  • cash and equivalents holdings represent nearly 40% of account assets for women, compared to 26% for men
  • overall, men have more account assets in individual equities (22% vs. 17%) and mutual funds (44% vs. 38%)
  • men also have much higher average SDBA account balances than women, $104,000 versus $48,000.

“While b oth women and men tend to invest conservatively in SDBAs, w omen appear to be more risk averse, which may also explain the significant difference in the overall rate of utilization of SDBAs among women and men,” said Jim McCool, senior vice president, Charles Schwab Corporate Services, in a statement.

Widespread Conservatism

Schwab said the data for the overall SBDA market shows that SDBA users (both men and women) were more conservative in the first quarter 2003 compared to fourth quarter 2002, likely driven by the Iraq war and other international issues that dominated the news:

  • first quarter net asset flows indicate a shift away from individual equities, which represented 23% of net asset flows versus 28.3% in the fourth quarter 2002, and into mutual funds and fixed income
  • cash and equivalents were 29% of PCRA participant assets, up from 28% in the fourth quarter 2002
  • taxable bond funds were 32% of all mutual fund assets, up from 27% in the fourth quarter 2002
  • utility stocks represented 7% of all equity sector assets held in PCRA accounts, up from 2% in the fourth quarter 2002.

Regardless of gender, participants continued to use SDBAs to diversify portfolios through an array of investments, including mutual funds. Though 401(k) plans generally provide a selection of mutual funds, participants still purchased additional mutual funds through their SDBAs:

  • participants continued to hold 43% of their SDBA assets in mutual funds
  • leading companies represented in the top ten mutual fund holdings included American Century, Fidelity, Janus, PIMCO and Vanguard
  • participants kept nearly two-thirds (64%) of their total 401(k) plan assets in their SDBA account .

The report represents data collected from plan participants who currently have at least a $5,000 balance in a Schwab PCRA account. Data is extracted monthly on all accounts that are open as of month-end and meet the minimum balance requirement. . The first quarter 2003 report and all prior reports are available at  www.schwab.com/sdbaindicators .

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