According to Charles Schwab’s SDBA Indicators Report, a benchmark on retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), the average account balance finished Q1 2020 at $252,675, down 5.58% year-over-year and down 14% from the end of 2019.
In the first quarter, the Dow Jones Industrial Average fell more than 23%, and the S&P 500 fell 20%. But, Nathan Voris, senior managing director, business strategy, Schwab Retirement Plan Services, explains that since SDBAs offer equities, mutual funds, exchange-traded funds (ETFs), fixed income and other securities besides Dow or S&P 500 members, comparing them to these indexes isn’t comparing apples to apples. Likewise, trying to compare SDBA returns to those of target-date funds (TDFs) is not accurate since TDFs offer different investment options. Voris adds that SDBA data only shows one part of a participant’s asset allocation and not the overall mix, as some could also invest in options on their plan’s core menu.
The first quarter SDBA Indicators Report also showed trading volumes increased compared with the previous quarter, at an average of 13 trades per account up from seven in Q4 2019, which is in line with broader investor activity seen during the first quarter.
At the end of 2019, participants in the Schwab Personal Choice Retirement Account (PCRA) held 37% in mutual funds, compared with 34% at the end of Q1 2020. Allocations to equities and ETFs likewise went down—from 29% to 27% and from 19% to 17%, respectively. However, participants in the PCRA held 12% in cash at the end of 2019 and this increased to 19% at the end of Q1 2020. The percentage of assets held in fixed income remained the same at 3%.
Generation X had the most PCRA advised accounts at 45.2%, and Baby Boomers were not far behind at 41%, while only 10.7% of the Millennials chose to use an adviser. The average participant balance for advised accounts was down to $395,618 from $466,805 last quarter, while non-advised accounts were also down from last quarter at $216,729 from $250,099.
Those with advised accounts made more trades on average—16.5 total versus 12.7 for non-advised accounts. Those participants who used advisers displayed a more diversified asset allocation mix and had a lower concentration of assets in particular securities. Advised participants also had a lower percentage in cash, very similar to last quarter, at 9.14% versus 22.83% for non-advised.
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