FYI: Most retirement plans, such as 401(k)s, typically lock you into a plan that offers a small selection of mutual funds for the participants to invest in.
However, more retirement plans are letting participants have a brokerage account within the plan. This allows investors to invest outside the plan's investment offerings, and put their money into any mutual fund, exchange-traded fund, stock or bond they choose.
Among these self-directed brokerage accounts (SDBAs) only 20% of the participants worked with an advisor, according Charles Schwab's SDBA Indicators Report for the second quarter of 2019. The study found that the SDBA participants who worked with an advisor had an average balance of $448,515 – nearly twice as much as the $234,673 held by non-advised participants
Regards,
Ted
https://www.forbes.com/sites/lcarrel/2019/08/31/investors-in-retirement-plans/#2d5acbfc4467
Comments
Perhaps those who read this may offer their opinion; either to the article or to me, too.
This is a bit of tongue in cheek; but a serious review of what we investors may read,see or hear on any given day.
My Sunday morning self-assessment: normal good sleep, 2 cups of coffee, blood pressure within normal readings, don't feel dizzy and can perform household duties without difficulty. Being a senior citizen, one may do these type of assessments to establish a baseline of normal; as muscle aches may only be from over doing physical work and feeling a little rough may not mean I'm going to have a heart attack or a stroke, but that I shouldn't have eaten so many baked beans to night before.
So, I read this article (twice) and come to the conclusion that either I am loosing my ability to process information properly or that this is a poorly written article that appears to be little more than an AD for Schwab and advisers to obtain fees. Perhaps I'm too ANAL or beginning to suffer from cranial/rectal inversion. I find that the data and numbers are very scattered and can't make heads or tails of any decent reference points. Those who are not investors might simply assume that they need an adviser, and that may be the case for many. On the other hand, one could invest in a moderate allocation/balanced fund that may be available. I have advised to this method over the years, to those who know me well.
From conversations over the years, I do know that offers to 401k/403b folks to have their accounts managed is growing; for a fee of 1% or so.
Conclusion: If I'm not following what this article is really about; then I need to consider that it is time to move all of our monies into FBALX. A 9.2% annualized return since inception in 1983 is a tough baseline return to beat from meddling with one's money.
Help me decide whether it is time for the FBALX tactic at this house.
Thank you for your time and comments.
Catch
It says that the "majority" of employees using advisors (43.9%) are Gen X, while Boomers came in second at 43%. It says this is surprising. It is not. It is arithmetic.
There are more Gen Xers (82M in the US) than Boomers (75M). Of those, many have retired and rolled over their employer plans. So there are many more Gen Xers in retirement plans than Boomers. Even if they're using advisors at a lower rate, the absolute number of Gen Xers with advisors should easily exceed the absolute number of Boomers using advisors.
https://www.kasasa.com/articles/generations/gen-x-gen-y-gen-z
The writer seems to think that Boomers would be more likely to use advisors. Let's assume that's true. Boomers tend to have (much) larger account balances. Putting these together, it's easy to see how the average advisor account (skewed by the large Boomer accounts) could be significantly larger than the average self-managed account, even if the advisor adds no value.
Let's say 32% of Boomers use advisors, and 16% of everyone else uses advisors. Let's say that Boomers represent 1/4 of all employees. (That means that 20% of everyone uses an advisor, as given in the article, since 32% x 1/4 + 16% x 3/4 = 20%.)
Boomers, being older, have larger accounts. Let's say on average, they have $1M in their accounts, and everyone else on average has $50K. Of all the employees, 20% use advisors, 80% don't.
The average advisor account value is: (32% x ¼ x $1M + 16% x ¾ x $50K) / 20% = $430K
The average self-managed account val is: (68% x ¼ x $1M + 84 % x ¾ x $50K) / 80% = $251,875.
This is not a sales pitch for using advisors. It's a sales pitch for growing your 401K as you get older. With or without advisors.
Our accounts are with Fidelity and for the most part would limit a balanced choice to FBALX; although other moderate allocation funds are also available to us.
From 1999, VWELX has the total return performance much over and above FBALX. Starting with the March, 2009 recovery, as to total return; FBALX is 2% ahead of VWELX. A chart of the two is pretty much a mirror.
Regards,
Catch