While they’re already popular, exchange-traded funds are looking to boost their growth further by getting onto 401(k) platforms, Dow Jones reports.
“ETFs and 401(k) plans are a natural match,” said Bruce Lavine, COO at ETF provider WisdomTree Investments. “ETFs shine a bright, transparent, low-fee light on all things in the mutual fund industry.”
But not everyone believes it will be easy for ETFs to beat out mutual funds, which comprise approximately half of the $2.4 trillion in 401(k) plans.
“Mutual fund are ingrained into the fabric of the 401(k) market,” said Rick Meigs, president of 401kHelpCenter.com. “Without some jolt that allows plan sponsors to look for a change to mutual funds, it’ll be tough for ETFs to have meaningful penetration. ETFs are making their way into retirement plans, but for now, they’re still very much a niche product.”
One of the biggest obstacles to providing ETFs in 401(k) plans is the brokerage fees that must be paid whenever buying or selling one. To overcome this, some firms are aggregating trades or creating ETF collective trusts.