Self-Directed Retirement Investors In Brokerage Accounts Stay in Equities Despite Volatility

According to a Charles Schwab report, the average account balance decreased approximately 20%, year-over-year.


Retirement investors who invest some 401(k) retirement assets through a self-directed Charles Schwab brokerage account saw their average account balances drop 3.55% in the third quarter of 2022 that ended September 30 compared to Q2 2022, and balances were down 19.84% year-over-year, new data shows.

The average account balance across all participant accounts finished at $273,412 for Q3, the Charles Schwab SDBA Indicators Q3 2022 Report found. That is lower than the $283,485 average value at the end of Q2 2022, and far lower than the average balance of $341,068 for 2021.

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“Stocks rallied early but retracted their gains to close out a third consecutive quarter of negative returns; from its August 16 high to September 30, the S&P 500 Index declined nearly 17%,” the report’s asset balance summary stated.

SDBAs are brokerage accounts within retirement plans, including 401(k)s and other types of retirement plans, that participants can use to invest retirement savings in individual stocks and bonds, as well as exchange-traded funds, mutual funds and other securities that are not part of their retirement plan’s core investment offerings.

Equities remained the largest holding for participants in Q3 2022, at 33.43% of assets, with mutual funds at 28.4% and exchange-traded funds at 20.96%, the report found. Cash and equivalents comprised 14.74%, with fixed Income just 2.51%, data showed.

“Overall, participant holdings remained similar to last quarter, with an increase in fixed income,” stated the report asset balance summary.

The largest equity sector holding was information technology at 28.8%, the report found. The top equity holdings remained Apple at 12.5%, Tesla 9.6%, Amazon 4.8% and Microsoft 3.2%.

Investors allocated the largest portions of fund flows to large-cap stock funds at 33.7%, followed by 19.7% for taxable bond funds and international funds at 12.9%, according to Schwab.

ETF investors continued to push assets into U.S. equity at 51.7% of assets, followed by fixed income at 14.1%, international equity at 12.7% and sector ETFs at 11.3%, data showed.

Additional report findings:

  • Trading volumes were slightly lower, at an average of 10.6 trades per account, compared to 11.2 trades per account in Q2 2022 and in 2021.
  • Advised accounts held higher average account balances compared to non-advised accounts, $435,604 vs. $233,875.
  • Gen X had the most advised accounts at 50.0%, followed by Baby Boomers at 30.7% and Millennials at 15.8%.
  • Gen X made up approximately 46% of self-directed brokerage account participants, followed by Baby Boomers at 30% and Millennials at 19%.
  • Baby Boomers had the highest self-directed brokerage account balances at an average of $437,280, followed by Gen X at $246,206 and Millennials at $83,408.
  • On average, participants held 13 positions in their self-directed brokerage accounts at the end of Q3 2022, consistent with Q2 and similar to last year.

The SDBA Indicators Report includes data collected from approximately 186,000 retirement plan participants who currently have balances between $5,000 and $10 million. Data is extracted quarterly on all accounts that are open as of quarter-end and meet the balance criteria.

Investment Product and Service Launches

Securian and QPA launch managed account for plan sponsors; ProShares and S&P announce ETF to invest in surging battery metal market; Franklin Templeton teams with experts on free alternative investment education program; and more.


Securian and QPA Launch Managed Account Product for Workplace Retirement Plans

Securian Financial and Qualified Plan Advisors announced an adviser-managed account solution, built with Stadion Money Management, focused on personalization to manage risk and help employees reach retirement income goals.

The QPA Managed Account Service leverages employee data to create an investment allocation unique to each individual and adjusts the investment mix automatically over time as an employee’s circumstances change, the firms said. Using data already provided streamlines processes and keeps costs reasonable, the companies said, adding that employees who want to provide additional data can do so to further personalize their allocation.

All aspects of portfolio management are integrated with Securian Financial’s recordkeeping system, the firms said.

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ProShares Launches ION, an ETF to Invest in Companies Mining In-Demand Battery Metals

ProShares, an exchange-traded fund provider, announced the launch of ProShares S&P Global Core Battery Metals ETF (ION), an ETF investing only in companies mining battery metals.

The companies in the fund supply the raw metals needed to power the batteries used in the growing number of electric vehicles, laptops, smartphones and energy-storage devices, the company said.

“An energy revolution is underway that is transforming the way we power our lives,” Michael Sapir, ProShares founder and CEO, said in a press release. “With ION, there is now an ETF that offers investors an effective way to access companies meeting the soaring demand for batteries and the metals needed to make them.”

ION tracks the S&P Global Core Battery Metals Index, which is currently made up of 41 companies in more than 15 countries, including Australia, Indonesia, South Africa and China. Many of these companies can be difficult for U.S. retail investors to conveniently access on their own, ProShares said.

SRIA Fintech Altruist Partners with HIP on Fossil Fuel Free Portfolios

The registered investment adviser fintech firm Altruist announced a partnership with environmental, social and governance investment firm HIP Investor to give advisers access to fossil fuel-free portfolio models focused on ESG and climate action.

“While markets are down, we’re seeing advisors rotate into strategies that they have had their eyes on, in particular values-based investing strategies,” Adam Grealish, head of investments for Altruist, said in a statement.

The announcement comes after Altruist launched its Model Marketplace in February 2021 featuring its own investment models—the Simplicity Series—alongside those of Vanguard and Dimensional Fund Advisors, later adding BlackRock, Redwood Investment Management and StateStreet Global Advisors.

Franklin Templeton Academy Introduces Alt Investing Learning Platform

The Franklin Templeton Academy has partnered with industry experts to launch an alternatives education program aimed to help financial professionals expand their knowledge of alternative investments.

The program offers a comprehensive curriculum on various types of alternatives, including courses on private equity, real estate, private credit, infrastructure and hedge strategies, the investment manager’s education division said.

“With today’s market volatility, geopolitical risks, and 40-year highs in inflation, financial professionals need a more sophisticated toolbox to help their clients meet their long-term financial goals,” Shane Clifford, a senior managing director for alternative strategies at Franklin Templeton, said in a release. “As advisors increasingly look to integrate alternative investments into their portfolios, we are committed to providing advanced education on and building proficiency in using these versatile and valuable investment strategies.”

The Alternatives Education program is offered through in-person and on-site classes, interactive webinars, e-learning modules and pre-recorded video. Course content is developed and delivered by experts in the alternatives industry and provided for free, the academy said.

Coursework is eligible for credit toward Certified Financial Planner® (CFP®), Chartered Institute of Management Accountants® (CIMA®), Retirement Management Advisor® (RMA®) and Certified Private Wealth Advisor® (CPWA®) certifications.

Markov Shows Results of Indices Designed to Capture Top Hedge Fund Performance in Liquid ETFs

Markov Processes International, Inc., an independent fintech risk analyzer, released eight years of performance data of an index that tracks a collection of liquid, retail exchange-traded funds that the firm says can deliver the performance of a diversified portfolio of institutional-quality hedge funds.

The MPI Eurekahedge 50 Tracker Index comprises anywhere between 25 to 30 liquid ETFs and is priced daily and updated monthly, the release said, adding that the performance of the tracker shows it can deliver the performance of a diversified portfolio of institutional-quality hedge funds, a path it has been on for the past eight years.

“We are excited about these results for two reasons,” Michael Markov, co-founder and CEO of MPI, said in a press release. “For one thing, we believe we have achieved a solid benchmark off which hedge fund and investors in hedge funds performance should be judged. Second, there are profound implications for investors, since we have shown that transparent, liquid ETFs can indeed be a proxy for opaque hedge funds.”

Year-to-date through October 2022, the MPI Eurekahedge 50 Tracker investable index tracker is down -1.8%.

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