Self-directed brokerage accounts, also known as brokerage windows, can be a useful tool for defined contribution plans. They allow increased flexibility for participants who want it, but self-directed brokerage may not be right for every plan. There are factors to consider before implementing it.
June 24, 2025
What’s self-directed brokerage?
A self-directed brokerage account is a special type of account that allows retirement plan participants to invest on their own through a brokerage platform. The idea is to give investors access to options not available on the plan’s investment menu. This may extend up to the entire universe of investable assets, but plan sponsors may decide whether to allow or exclude certain asset classes within the brokerage window.
Notably, 403(b) plans are generally limited to offering annuities and mutual funds, even within the brokerage window.
Why consider brokerage windows?
Brokerage windows can be an attractive option to help accommodate plan participants with highly specific needs. Typically, these are more sophisticated and engaged investors and/or those who might be considered “squeaky wheels.” They may be high earners or individuals responding to external factors, such as popular interest in niche investments or recent reductions to your investment menu.
Usually, the larger your plan, the more likely you are to encounter such requests. According to a 2024 survey by the Plan Sponsor Council of America (PSCA), only 26% of retirement plans offered brokerage windows, with higher adoption among larger plans — 45% for plans with 5,000 or more participants.
Some plan sponsors, often on the smaller side, opt for brokerage window only (BWO) plans where brokerage accounts are the sole investment option. This arrangement may appeal to professional groups (e.g., medical and legal fields) in which owners/partners want to work with a financial professional and select from a wide range of investment options.
It’s important to be aware there is still uncertainty around fiduciary responsibilities related to brokerage windows. Plan fiduciaries should evaluate both the advantages and risks related to making brokerage windows available as well as be mindful of guidance issued by the Department of Labor (DOL).
How to set up a brokerage window
Your first step in setting up a self-directed brokerage option is to talk with your recordkeeper about the programs it offers and their implementation rules. Be sure to do due diligence on associated fees. While the brokerage fees are paid by the participants who use the platform rather than shared by all participants, the plan sponsor still has the fiduciary responsibility to keep fees reasonable.
You may also reach out to Capital Group for guidance on evaluating your options. We’re always here to help.
John Doyle is a senior retirement strategist with 38 years of investment industry experience (as of 12/31/2024). He holds an MBA from the F.W. Olin Graduate School of Business at Babson College and a bachelor’s degree in economics from Georgetown University.