Self Directed Brokerage Account - Employee Beware!

August 29, 2022

When it comes to choices, the University of Nebraska is giving you two big choices with your retirement plan investments. One way is employees will have a Vanguard Targeted Dated Fund chosen for them based upon their date of birth. On the other end of the spectrum, employees will have the ability to open a Self Directed Brokerage Account (SDBA) which gives them access to choose from thousands of mutual funds.

There was a lot of discussion and questions on the recent NU Retirement Plan enhancement calls about the SBDA. What features do they have, what the costs are, what the choices will be. The University, TIAA, and Fidelity all emphasized that the investment choices that employees make inside the SDBA will not be monitored by the University or the custodians. Investor/Employee Beware!

The warning is correct. Do not jump into utilizing a SDBA for your retirement funds just because you are upset that the University is choosing a Target Date Fund for you. You must understand the risk of choosing your own mutual funds and know how to monitor your investment allocations. This will be an ongoing process throughout your career.

Your investment choices will only be in approved mutual funds by TIAA or Fidelity (but they won’t necessarily be only TIAA or Fidelity funds only). That means no individual stocks or ETFs. Also some fund share classes may have fees and commissions while others may not. There is a lot to consider.

So, it is not just about picking the next best fund. It is understanding the risks of investing, your time horizon, and how your retirement plan fits with your overall portfolio of assets. You are going to have to pretend you are an advisor to yourself and not trying to be a hedge fund manager trying to make the most money by taking on the most risk. However, by utilizing a SDBA (especially Fidelity's option) you do have the ability to allow a financial advisor to actually manage your portfolio for you.

So, if you want to go down the path of a SDBA then

Do the following:

Do your homework. Call TIAA and Fidelity to understand the respective SDBA’s features.

Know what you are buying. Know the share classes, fees, and commissions.

Don’t set it and forget it. You need to be engaged in your portfolio decision throughout your career.

Get help. Utilize an investment advisor to be sure you are going down the right path.

AND, if you use an qualified financial advisor:

Do your homework on the advisor and the firm they work with.

Know the fees of the advisor.

Be engaged in the process.

Ask questions. It is your money!

Lastly, If you want to keep your Fidelity funds that you are currently invested in then you must open a SDBA prior to October 7, 2022 to be able to do a one-time transfer in-kind. Contact Fidelity for more information.