Brokerage windows, while being offered in a larger number of retirement plans—or even as the sole retirement savings option—are already controversial. Even asthey’re defended by the financial industry,the Department of Labor has them in its sights.

But some in the industry are more than a little concerned aboutthem too.

And now a Vanguard study of its plans offering brokerage windowsand the participants who use them shows that their appeal toparticipants might be limited—but very profitable for the limiteddemographic that relies on them.

While brokerage windows offer the opportunity for 401(k)participants to invest in options not included in the basic planmenu, they do so without the sponsor assuming any fiduciaryresponsibility—and leave the participant open to risky investmentsas well as high fees.

In addition, they can expose the sponsor to fiduciary liabilityif those fees are spread among participants who don’t use thewindows in their accounts.

Given the lack of sophistication of the average Americaninvestor, a brokerage window could present not an opportunity, buta hazard to most people participating in a retirement plan.

The need for better understanding of the investments accessiblethrough a window is beyond the skills of most workers, while thepeople who do use brokerage windows are often in particularprofessions, such as doctors and lawyers.

In December, Schwab data provided in comments to the DOL on thesubject of brokerage windows indicated that, while more than 60percent of the plans it services offer windows, just 4 percent ofparticipants use them.

However, they still manage to account for 11.8 percent of planassets.

Even more extraordinary is information from a new Vanguard paperthat examined the self-directed brokerage feature in the plans itprovides.

It found that, in 2014, 28 percent of Vanguard plan participantshad access to brokerage windows—but only 1 percent actually usedthem. In fact, 10 percent of the firms offering brokerage windowshad zero participants using them.

In addition, it said, 22 percent of the firms with access tobrokerage windows were law firms, and “on average 7 percent of lawfirm assets were invested in brokerage.”

Brokerage window users are different from other planparticipants in several ways, Vanguard said. “Brokerageparticipants are 6 years older, have more than twice the tenure,and are disproportionately male [80 percent male], compared withthe Vanguard universe [59 percent male],” the paper said.“Brokerage participants contacted Vanguard much more frequentlythan all participants did—with a median contact rate of 66 times in2014, compared with only 2 contacts in 2014 for allparticipants.”

However, here’s the kicker: “The most striking differencebetween brokerage participants and all participants is theiraccount balances. The median brokerage account balance was$262,000—more than 8 times larger than the median Vanguard accountbalance of $30,000.”

Brokerage window participants, it said, invest an average of 45percent of their account balances in the brokerage option. Whilelarger plans are more likely to provide a brokerage window to theirparticipants, “smaller firms have a higher proportion of planassets invested in the brokerage option....” The brokerageallocation ranges from 10 percent or less (18 percent of brokerageparticipants) to more than 90 percent (15 percent ofparticipants).