Self-Directed Account Balances Rise in Q4

Balances for retirement investors using Charles Schwab self-directed brokerage accounts bounced back in the fourth quarter of 2022, new data shows.

Retirement investors who invested some 401(k) retirement assets through a self-directed Charles Schwab brokerage account saw their average account balances increase 2.45% in 4Q 2022 compared to Q3 2022, while overall balances were down 20.6% year-over-year.

The average account balance across all participant accounts finished at $280,099 for Q4, the Charles Schwab SDBA Indicators Q4 2022 Report found.

SDBAs are brokerage accounts within retirement plans, including 401(k)s and other types of retirement plans, in which investors can select to put retirement savings in individual stocks and bonds, as well as exchange-traded funds, mutual funds and other securities that are not part of their retirement plan’s core investment offerings.

Approximately 5% to 10% of participants invest some of their assets in an SDBA if one is offered in their plan, according to a Schwab spokesperson.

“Overall, participant holdings remained similar to last quarter, with an increase in fixed income,” the report stated.

Allocation trends for SDBA retirement investors were slightly different in Q4 than Q3: Equities remained the largest holding at 31.3%, compared to 36.9% last year and 33.43% for Q3; mutual funds were second at 29.4%; and exchange-traded funds came in at 22.1%, the report found.

The research showed allocations to U.S. equity ETFs—comprised of large-cap, mid-cap and small-cap funds— continued to be the top ETF holding in the accounts at 51.69%, followed by fixed-income ETFs at 13.77%, international equity ETFs at 13.11% and sector ETFs at 11.34%.

Cash and equivalents comprised 13.65%, with fixed income at just 3.53%.

Additional report findings:

• Trading volumes were lower, at an average of 9.6 trades per account, than in 3Q 2022 (10.6 trades per account) and lower than one year ago.
• Advised accounts held higher average account balances compared to non-advised accounts, $459,438 vs. $236,206.
• Gen X had the most advised accounts, at 50%, followed by Baby Boomers at 30% and Millennials at 16%. 
• Gen X made up 46.2% of SDBA participants, followed by Baby Boomers at 28.7% and Millennials at 19.5%.
• Baby Boomers had the highest SDBA balances at an average of $453,554, followed by Gen X at $252,171 and Millennials at $85,446.
• On average, participants held 12.6 positions in SDBAs at the end of Q4 2022, similar to the previous year and the previous quarter.

The SDBA Indicators Report included data collected from approximately 187,000 retirement plan participants who had balances between $5,000 and $10 million. Data was extracted quarterly on all accounts that were open at the end of Q4 2022 and met the balance criteria.