More Participants Seek Advice For Brokerage Accounts

Smart401k.com, an Overland Park, Kan., advice provider catering to defined contribution plan participants, experienced a recent surge in participants seeking help with assets in self-directed brokerage accounts. The firm's average investor is 49 and has $195,000 of DC assets. "More people are taking advantage of a self-directed brokerage option that's been available to them," said Scott Revare, ceo. "The most convenient thing to do would be to check off a lifestyle fund but people think they can get better returns by having more funds to choose from."

The percentage of Smart401k.com's 4,500 customers with access to self-directed brokerage accounts grew to 17.3% from 9.6% during the six-month period ending April 1, Revare said. The firm charges $59 per quarter or $199.95 per year to develop and monitor mutual fund portfolios that match its customers' risk profiles.

Revare attributes the figures to a recent wave of walk-in customers from firms offering directed brokerage capabilities rather than an increase in the number of sponsors expanding their core investment offerings. He also said participants with sizeable nest eggs are warming up to directed brokerage options because Fidelity Investments and Charles Schwab & Co. maintain features to simplify enrollment and trading procedures. Smart401k.com is pressing its advantage by sending e-mail advertisements through plan sponsor partners to participants who have directed brokerage options in their 401(k) and 457 plans. Officials from Schwab and Fidelity said their self-directed brokerage offerings have not changed over the past year but suggested other reasons for recent surges in participant activity. Deborah Pont, a Fidelity spokeswoman, said the firm has spent years perfecting a self-directed brokerage program with all the features offered in other areas of the firm's Web site. Robert Jesch, director of Schwab's self-directed DC brokerage account, said strong market performances have led investors to seek additional investment choices. "The increase in the market definitely attracts new accounts. Our [self-directed] accounts are up nine or 10% in terms of participant accounts over the past 12 months."