Self-Directed Securities Brokerage
Brokerage Account Features
Via a brokerage firm that you select, eligible employees would have access to a whole world of choices: stocks, bonds, CDs, ETFs, and an expansive universe of mutual funds.
no asset fee
no advisory firm fee
routine trading fees apply per your brokerage firm’s schedule
a record keeping fee of $50 per participant per year applies to persons who select a self-direct brokerage account (SDBA)
limitation on % of plan assets in SDBA, based on plan size
Participant Advantages
investment spectrum is extended to most individual securities
most all funds and ETFs open to 401k investing are also included
investment research tools are expanded as offered by the securities brokerage firm
Plan Sponsor Advantages
allows experienced investors to personalize by leveraging a greater variety of options
participants can manage their own investments and expenses via combined selections
customization by either imposing limits on how much participants may allocate, or by the types of investments available
Considerations
SDBA requires a greater degree of prudence by the employer fiduciary considering the additional risk by participants holding individual securities
SDBA also requires more experience and investment education on the part of the employee in order to maneuver the dynamic nature of individual securities selecting and monitoring
Related, owning an individual stock or bond does not give the diversification of a mutual fund or ETF
SDBA is self-managed vs. having a professional management team for a fund or ETF
Federal rules require that plans offering a securities brokerage option make it availble to all employees including those who have not had securities trading experience.
Let us know of your favorite brokerage firm.
The administrator will do the rest with instructions for account setup to make it easy on your end.
Additional Disclosure: A self-directed brokerage account enables a Plan Sponsor to deliver an extra level of diversification and personalization to participants but adds certain specific responsibilities and liabilities in the Fiduciary capacity. As with any retirement investment option, a SDBA should be carefully reviewed prior to its addition in the Plan. The Plan Sponsor should consider the pros and cons, associated trading fees, and participants’ educational needs accompanying the addition of a SDBA.
Not all investment types are available in a self-directed brokerage account, including but not limited to: options, purchases on margin, short sales, commodities, outright precious metals, collectibles, futures, currencies, and penny stocks.
