How to Compare 401k Brokerage Accounts

When choosing to offer a brokerage account feature in a 401k plan, plan sponsors must consider several features and characteristics. Comparing 401k brokerage accounts involves examining fees, fund offerings, other permitted investment options, technology resources and experience. In addition, you must ensure that the plan's current trustee and third-party administrator (if applicable) are capable of interfacing with the new brokerage account provider. In some cases, the current trustee may offer these services and it is wise to strongly consider them.

Instructions

1. Ensure your plan's trustee can accommodate a brokerage account option. Before comparing brokerage options, ensure your current platform can accommodate this; if it can't, determine if it's worth switch trustee's to offer this service.

2. Determine the needs of the plan. Not all brokerage accounts are the same; some providers, such as T. Rowe Price, Fidelity and Schwab, specialize in offering brokerage accounts for 401k plans. The operational aspects of trading and securities processing is slightly different from in a standard retail brokerage account, so it's important to find a provider with experience.

3. Compare fees. The important fees are brokerage commissions per trade at the participant level, base account fees for the number of participants opening brokerage accounts, and any asset-based charges.

4. Compare tecnology and investment options. All brokerage accounts will allow mutual fund transactions as well as basic stock and bond trading. A large universe of mutual funds is generally desirable, and in some cases exchange-traded funds and covered-call options should be permitted.

References

• 401k Help Center: Self-Directed Brokerage Accounts