If you are an investor with a 401k or 403B plan with Fidelity, you may have access to their BrokerageLink ® feature. Fidelity BrokerageLink® combines the convenience of a workplace retirement plan account with the additional flexibility of a brokerage account, giving participants expanded investment choices and the opportunity to actively manage retirement savings. Many 401(k) and 403(b) plans offer BrokerageLink, and most plans that offer BrokerageLink allow advisor access.
The average retirement plan provides a short list of investment choices across stock and bond categories along with “sit-it and forget-it” target date funds. While these funds will usually allow a participant to create a well-diversified portfolio, the choices are limited and may not be well suited for all participants – particularly conservative investors.
For investors who want more control over their asset allocation, BrokerageLink® may be the way to go. For our discussion today, we’ll focus on Fidelity’s offering, but many retirement plans administered by other institutions such as Charles Schwab, Ascensus, and Vanguard offer similar “brokerage window” options.
What is a BrokerageLink account?
BrokerageLink® is a self-directed brokerage account within the 401k/403B, allowing a participant to access a much broader universe of securities. Since these accounts are not “standard” offerings of 401ks, participants will have to contact Fidelity to open this account within their 401k plan. Some Plan Sponsors limit the percentage of your 401k that can be moved into the BrokerageLink® account and also the types of investments purchased within the account.
Benefits of having a BrokerageLink Account
Expanded Investment Options
Having a BrokerageLink® account expands the number of investment options beyond the standard company fund lineup. These options may include, but are not limited to individual stocks, bonds, exchange traded funds (ETFs), mutual funds, closed-end funds, and structured notes. The broader selection of thousands of investment choices increases the level of diversification that can be achieved and may give access to investments that are superior to those offered in the standard 401k plan.
BrokerageLink ® accounts must be established by the individual participant but once established, participants can add a Registered Investment Advisor (RIA) to their account. This means the investor can leverage the experience and expertise of a professional investment advisor to select, buy and sell securities on their behalf. Working with an independent investment advisor can help minimize common investor mistakes while improving the probability of success in achieving financial independence.
Protective Investment Options
By adding a BrokerageLink ® account, investors can opt to have their wealth manager invest in better protective investments like structured notes. Structured notes can provide principal protection, higher income, and enhanced upside to traditional stock index investing. Some structured notes, for example, can provide complete principal protection for up to 30-50% market index declines and double-digit income streams.
Potentially Lower Fees
The fee structure of a BrokerageLink ® will be different than a primary 401k account and will be largely determined by the decision to work with a Registered Investment Advisor. Any potential increase in fees can potentially be offset by utilizing low-cost ETFs, index funds, and institutional class mutual funds. Investing in instruments with higher potential returns will also be compelling.
Should I be using a BrokerageLink ® account?
If you are curious whether or not BrokerageLink® is available within your Fidelity plan or if this plan may be appropriate for you, please call us at 617-769-2226 or email firstname.lastname@example.org