Self-Directed Account Diversification Stats from Charles Schwab

A new report from Charles Schwab explores retirement plan participant investment activity within self-directed brokerage accounts; findings show self-directed accounts associated with advisers are better diversified.

Charles Schwab has published the third-quarter update of its self-directed brokerage account indicators, finding trading volumes remained the same as the previous quarter.

According to Schwab’s analysis, participants made the most trades during Q3 in their single-stock holdings, followed by mutual funds and exchange-traded funds (ETFs). Mutual funds held the majority of participant assets and were largely unchanged at 37.4% of holdings. Stand-alone equities were the second largest holding, the analysis shows, at 30.5%. ETFs made up 17% of self-directed brokerage account assets; cash and equivalents came in at 12.65 and fixed income at 2.7%.

Within the mutual fund category, large cap stock funds had the largest allocations, at 29.3%. Next most popular was taxable bond funds, at 19.2%, and international funds, at 16.7%. Looking at stand-alone equity investments, the largest equity sector holding category was information technology, at 32.1%. This was an increase of 2% over last year, according to Charles Schwab.

For the ETF category, U.S. equity ETFs enjoyed the greatest popularity, with large cap U.S. equity ETFs being the most popular.

Looking at flows, Charles Schwab finds there was a change during the quarter. Namely, the largest asset net flow class was fixed income and not equities, as was the case during the second quarter.

Roth versus traditional savings, and the role of an adviser  

According to Charles Schwab’s data, Roth-style accounts had balances far below those of traditional self-directed brokerage accounts—at $66,972 versus $279,080. Generation X had the most Roth account ownership as a percentage of accounts in the respective generations. Schwab says those with Roth-style accounts demonstrated only about half the trading volume of traditional account holders.

The Q3 data shows that of the 19% of participants who used an adviser to manage their self-directed brokerage account, roughly 45% were Baby Boomer clients, similar to the number for Generation X (42%). Yet just 8.5% of Millennials chose to use an adviser.

Those participants who used advisers displayed a more diversified asset mix and had lower concentration of assets in particular securities. Advised participants also had a lower percentage of cash in their accounts, at 4% versus 16.5%.

The full report is available for download here.