Adding a brokerage option to a plan’s investment lineup allows participants to invest beyond the plan’s menu of offerings, potentially in a wide range of mutual funds, individual stocks and bonds, ETFs, and even cryptocurrency.
But there are both risks and benefits to including a brokerage option in a 401(k) plan. Brokerage options aren’t suitable for all participant populations, and ERISA requires that plan sponsors assume additional fiduciary responsibilities when offering them.
Because the investment options directly influence participants’ likely retirement outcomes, it’s crucial that plan sponsors design an appropriate investment menu. We encourage you to weigh the risks and benefits of adding a brokerage option, as outlined in our newly updated paper, Determining the Suitability of a Brokerage Option in a 401(k) Plan.
Source
1 How America Saves 2024. Vanguard.
Notes
- For more information about Vanguard funds, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
- You must buy and sell Vanguard ETF Shares through a broker, who may charge commissions. Vanguard ETF Shares are not redeemable directly with the issuing Fund other than in very large aggregations worth millions of dollars. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.
- All investing is subject to risk, including the possible loss of the money you invest.