Investing May 21, 2019

Strong Returns Boost SDBA Balances

A previous Schwab analysis found retirement plan participants in advised self-directed brokerage accounts (SDBAs) displayed a more diversified asset allocation mix and had a lower concentration of assets in particular securities than those in non-advised accounts.

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The average self-directed brokerage account (SDBA) balance rose to $267,609 in the first quarter, an 8.7% increase from the last quarter of 2018, largely due to strong market returns, according to Charles Schwab’s SBDA Indicators Report.

Thirty-seven percent of participants’ assets were in mutual funds, the same as the previous quarter. Equities were the second-highest holding, at 29%, followed by exchange-traded funds (ETFs) (17%), cash (13%) and fixed income (3%).

Last year, Schwab’s analysis found 18.7% of SDBA accounts were managed by an independent investment adviser.  Those participants who used advisers displayed a more diversified asset allocation mix and had a lower concentration of assets in particular securities. As for ETF holdings, advised participants again had more balance among all the holdings, not having more than 3% of any one ETF.

Among mutual funds, large cap represented 29% of all allocations, followed by taxable bond (20%), international (16%), hybrid (12%) and small-cap funds (12%).

Among equities, Apple remained the top overall holding, representing 9.1% of all equity holdings. Amazon was next (6.4%), followed by Berkshire Hathaway (2.5%), Microsoft (2.1%) and Facebook (1.8%).

Among ETFs, investors allocated the most dollars to U.S. equity (48%), followed by international equity (16%), U.S. fixed income (15%) and sector ETFs (11%).

On average, participants made just 6.5 trades during the quarter and held 10 positions in their SDBA. Baby Boomers ended the quarter with the largest balance of all generations, at $374,622, up from $342,810 in the last quarter of 2018. Gen Xers had the next highest balance ($202,481), followed by Millennials ($65,928).

The average age of the SDBA participant was 51. Gen Xers made up 41% of all participants, followed by Baby Boomers (40%) and Millennials (12%).

The report is based on data from participants in the Schwab Personal Choice Retirement Account (PCRA).

Deals and People May 21, 2019

Janet Dhillon Sworn in as EEOC Chair

As Chair, Dhillon will continue to ensure policies are enforced to enable older individuals to work as long as they want and to prevent age discriminatory retirement programs and policies.

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Janet Dhillon was sworn in today as the chair of the U.S. Equal Employment Opportunity Commission (EEOC) by Acting Chair Victoria A. Lipnic.

She will serve as the 16th Chair of the EEOC. Dhillon was first nominated by President Donald J. Trump on June 29, 2017, and confirmed on May 8, 2019. Her term will end on July 1, 2022.

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The EEOC may be mainly thought of as an enforcer against gender, racial and national origin bias in workplace hiring and firing, but it also takes actions that affect retirement plans and individuals who want to continue working into retirement.

A Gallup poll found 74% of employees plan to work past their retirement age, and the EEOC has cracked down not only on employers that show age bias in hiring, but also on retirement policies that discriminate against older workers and discriminatory early retirement incentive plans. In 2017, coinciding with the 50th anniversary of the Age Discrimination in Employment Act (ADEA), the EEOC held a hearing to discuss what is working and what is not. As witnesses pointed out, some employees want to keep working either for engagement reasons or financial reasons, and some want to retire from their current jobs to pursue ‘encore’ careers. All witnesses noted that age discrimination in employment is still ongoing.

As chair, Dhillon will continue to ensure policies are enforced to enable older individuals to work as long as they want and to prevent age discriminatory retirement programs and policies.

Dhillon practiced law in the private sector for more than 25 years. Prior to joining the EEOC, Dhillon served as executive vice president, general counsel and corporate secretary of Burlington Stores, Inc. Previously, she served as executive vice president, general counsel and corporate secretary of JC Penney Company, Inc., and before that, as senior vice president, general counsel and chief compliance officer of US Airways Group, Inc.

Dhillon began her legal career at the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, where she practiced for 13 years. She is a graduate of Occidental College, magna cum laude, and the UCLA School of Law, where she ranked first in her class.

Dhillon joins Commissioners Lipnic, who has served as Acting Chair since January 2017, and Charlotte Burrows. With her swearing-in, the Commission regains a quorum that it lost on January 3.

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