Understanding Fidelity’s BrokerageLink Feature for 403(b) & 401(a) Retirement Accounts
Fidelity’s BrokerageLink is a self-directed brokerage option available within certain Fidelity employer-sponsored retirement plans, including 403(b) and 401(a) plans. BrokerageLink offers the ability to expand your investment options to thousands more mutual funds within your existing workplace retirement accounts.
How BrokerageLink Expands Investment Options
Standard retirement plans like 403(b) and 401(a) plans typically offer a limited menu of investment choices, such as a selection of mutual funds, target-date funds, or stable value options curated by the plan sponsor. While these core fund options are designed for simplicity and broad diversification… they may not fully accommodate individual preferences or advanced strategies.
BrokerageLink addresses this limitation by allowing participants to transfer assets from their core plan investments into a self-directed account where they can access a significantly broader range of investments. This expansion enables investors to pursue more personalized strategies, potentially aligning their portfolios more closely with specific financial objectives, such as growth, income, or preservation of capital.
In particular, BrokerageLink provides access to thousands of mutual funds beyond those available in the standard plan lineup. This includes funds focused on targeted and sector-specific investments, such as semiconductors, gold, bitcoin, healthcare, energy, or emerging markets.
By incorporating these specialized mutual funds, participants can fine-tune their exposure to particular industries or themes that may not be represented in the plan's default offerings.
The Ability to Enhance Portfolio Diversification
One of the primary benefits of BrokerageLink® is its potential to expand portfolio diversification. Traditional retirement plan options often emphasize broad-market funds that spread risk across asset classes, but they may lack depth in certain areas. With access to a wider array of mutual funds, including those targeting specific sectors or regions, investors can build more nuanced portfolios.
For example, an investor heavily concentrated in large-cap U.S. equities through their core plan could use BrokerageLink® to add international mutual funds, sector-specific funds (e.g., real estate or commodities), or funds with alternative strategies like value or growth investing. This layered approach can help mitigate risks associated with over-reliance on a single market or asset type, potentially smoothing returns over time.
Diversification does not guarantee profits or protect against losses, and it requires ongoing management. Participants must monitor their allocations, as BrokerageLink® investments are self-directed and subject to market volatility, fees, and trading restrictions.
Benefits for Retirement Plan Participants
BrokerageLink can offer several advantages for individuals seeking greater control over their retirement savings:
- Customization and Flexibility: Investors with specific knowledge or preferences can select mutual funds that match their views, potentially leading to a more engaging and tailored retirement strategy.
- Potential for Optimized Returns: By accessing targeted investments, participants may capitalize on opportunities in underrepresented areas, though this comes with increased risk and the need for research.
However, these benefits are balanced by considerations such as additional fees (e.g., transaction costs for mutual funds), the absence of fiduciary oversight, and the requirement to comply with plan contribution limits and distribution rules. Not all plans offer BrokerageLink®, and availability depends on the employer. Participants should review the BrokerageLink® fact sheet and commission schedule for their specific plan.
In summary, BrokerageLink serves as a valuable tool for expanding investment horizons within existing Fidelity Workplace Retirement accounts.