Clients of My Solo 401k Financial like to use a brokerage firm such as Fidelity Investments and Charles Schwab to hold the self-directed solo 401k funds. They get the best of both worlds by opening a self-directed solo 401k offered by My Solo 401k Financial that allows for not only investing in equities (e.g., stocks and exchange traded funds) as well as alternative investments (e.g., real estate, promissory notes, private equity, precious metals, etc.), but also participant loans and contribution types such as pre tax, Roth (both employee and employer) and voluntary after-tax solo 401k contributions for performing the mega backdoor Roth solo 401k conversion.
Here is a comparison between the Charles Schwab and Fidelity brokerage accounts for a self-directed Solo 401k with checkbook control.
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Similarities:
- Both Schwab and Fidelity allow opening brokerage accounts in the name of your Solo 401k plan to provide checkbook control over the plan’s investments.
- They do not charge any account maintenance fees for the Solo 401k brokerage accounts.
- The brokerage accounts come with a free checkbook to facilitate alternative investment transactions.
Differences:
- Schwab charges $25 for outgoing wire transfers, while Fidelity charges $20.
- Brokerage Account Establishment: Fidelity Investments will accept secure upload of the solo 401k brokerage forms if you already have an account at Fidelity (e.g., IRA, former or current employer 401k, or existing solo 401k), or the forms can be mailed to Fidelity if can’t upload. Charles Schwab accepts a fax of the solo 401k brokerage forms and they can be mailed to Schwab’s back office.
- Contributions: Fidelity Investments accepts solo 401k contributions via ACH-by linking your personal or business bank account to the Fidelity brokerage accounts. Schwab on the other hand only accepts checks or wires.
- Funding Alternative Investments: Fidelity Investments will wire the funds out but requires the wire directive taken to the local Fidelity branch, or the investment can be processed by check using the solo 401k checkbook. Charles Schwab can also make the investment by and will accept the wire directive by fax. Alternatively, you can use the Schwab issued checkbook to fund the alternative investment.
Other Considerations:
- Both Fidelity and Schwab are popular choices that make it easy to open brokerage accounts for third-party Solo 401k plans.
- My Solo 401k Financial assists clients in preparing all the required paperwork for opening the brokerage accounts at either Schwab or Fidelity.
- The decision may come down to personal preferences, any specific investment needs, and the responsiveness of the respective brokerages.
While Schwab and Fidelity are both viable options, there are some nuanced differences in account establishment, making contributions, and funding alternative investment that could influence which brokerage is a better fit for a particular self-directed Solo 401k brokerage account.
