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Self Directed Brokerage Account

Frustrated with Your Company Retirement Plan?

Many in today’s workforce have become dissatisfied with their company’s retirement plan. This concern can be significant as their retirement plan may represent their largest financial asset. The issue with company 401(k)s, 403(b)s, or 457 accounts, is that these plans can be very limited in two significant ways.

  • Companies often restrict the number of investment choices and management styles for various reasons.
  • It can be very difficult to get help or advice regarding company retirement accounts.

These constraints can have a negative effect on returns and the associated risk taken related to the returns. (Please see Schwab Study discussed below.)

<span>A Possible Solution</span>

A Possible Solution

However, there is a potential remedy to this problem, and chances are your plan already offers it. Employees may not be aware of it because your employer and the employer’s plan administrator have no incentive to advertise the solution. What is this hidden solution? It is a Self-Directed Brokerage Account (SDBA).


Our Primary Purpose

And what is a Self-Directed Brokerage Account (SDBA)?


Many larger and some smaller plans offer this option. Essentially, a brokerage account can be set up as part of the 401(k). This works well for the following reasons:

  • Funds that are moved to the SDBA don’t actually leave the plan. The SDBA will show up like another investment on the 401(k) statement.
  • SDBA provides a window within the 401(k) which opens a wider range of investments to choose from.
  • Diversification is provided not only by a wider range of investments, but also in terms of management styles (e.g., strategic vs. tactical, or passive vs. active).
  • Funds can be moved from the core portion of the 401(k) to the SDBA with no tax consequences since the SDBA is part of the 401(k).
  • An advisor can provide guidance with portfolio selection and assistance with risk/return assessment.
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Can working with an advisor make a difference with your SDBA?


Schwab did a study in 2019 on SDBA participants that worked with an advisor. Here are their findings:

  • Participants working with an advisor had nearly twice the size of account balances as compared with non-advised participants.
  • Participants working with an advisor had more diversified accounts, higher average trades and a lower percentage in cash.
  • The study concluded that the participants working with an advisor had greater savings, better diversification, and more disciplined investing behavior.

The important thing to remember is that SBDA accounts offer an opportunity to further diversify. Remember, there is a difference between effective and ineffective diversification. This is where a financial advisor can offer significant value.
Contact us if you would like to take greater control of your company retirement plan.

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