According to Charles Schwab’s SDBA Indicators Report, the average account balance for SDBAs was $280,099 at the end of 2022, down 20.6{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} year over year but up 2.45{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} from the third quarter of 2022. For the fourth straight quarter, Schwab reported negative returns year over year, in line with the market as a whole.
According to Robert Jesch, product director for Schwab Retirement Business Services, “there were no big shocks in the results from the previous quarter, and participants were relieved to see their SDBA balances improve from the third quarter of 2022.” It was good to see that participants maintained their asset allocations, demonstrating their ongoing resiliency. The greater market environment tends to be reflected in SDBA patterns, which was still true in Q4 2022.
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Retirement plan participants can invest their retirement funds in individual stocks and bonds, ETFs, mutual funds, and a variety of other securities that are not included in their retirement plan’s core investment options by using SDBAs, which are brokerage accounts that are part of retirement plans like 401(k)s. In addition to benefiting from the primary features of their plans, participants can make investments through their SDBAs.
The report states that participant holdings were consistent with those in the third quarter, with equity holdings remaining the highest at 31.3{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2}. Apple, Tesla, Amazon, and Microsoft were the top four stocks, and information technology was the largest equity sector holding overall. The next-biggest holding, at 29.4{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2}, comprised mutual funds, with the highest portion going to large-cap stock funds, followed by taxable bonds and overseas funds. ETFs, which accounted for 22.1{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} of participant assets, came in third. Investors continued to place most of their investment dollars in U.S. stock ETFs, followed by sector, international, fixed-income, and equity ETFs.
A lower 9.6 transactions per account compared to 10.6 trades per account during the third quarter was also seen in trading volumes. Average account balances in advised accounts were higher, at $459,438.
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The survey indicated that participants who utilized advisors had a more diversified asset allocation mix and had less asset concentration in certain stocks, with Apple ranking as the top security for everyone. Just 8.01{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} of advised participants’ equity holdings were in Apple, compared to 13.03{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} of non-advised participants’ equity assets. Similar to the previous quarter, advised participants had a lower percentage of cash, at 6{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} vs 17.29{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} for non-advised members.
SDBA participants comprised 46.2{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} of Gen X, 28.7{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} of baby boomers, and 19.5{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} of millennials. The average SDBA balance for baby boomers was $453,554, followed by Gen X at $252,171 and millennials at $85,446.
According to Jesch, around 5 to 10{c380c443b29f56f2f296535bf2f844f113c94e333abd8882073f7ec8de27f4a2} of participants use an SDBA if it is available in their plan.
“Savers increasingly seek more choice in their investments and may be unaware that an SDBA could satisfy their tastes given the broader range of products compared to a standard core menu,” he said. “Plan sponsors and advisors have a chance to address workers’ requirements by promoting awareness about SDBAs for a more personalized, hands-on investing experience.” As with other retirement plan offers, extensive education for participants is essential. Plan sponsors and advisors can provide participants with information that clarifies the various alternatives available in their plans and best practices for utilizing them.”
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