They’re barely a blip on the radar screen in 401(k)s, but exchange-traded funds are looking to expand their presence in the retirement market.
According to a Cerulli report, more ETF sponsors are focusing their distribution eorts on small- and midsized dened contribution (DC) plans (those with assets less than $250 million).
Currently, ETFs constitute less than half of one percent of the investment vehicles in use in 401(k) plans, but both record keeper Schwab and robo-advisor Betterment have recently rolled out managed account options with ETFs for 401(k).
According to the Cerulli report, “Historically, ETFs were not used in 401(k) plans because of the reasons for which ETFs are typically appealing—intra-day trading, tax advantages, and low costs—are either irrelevant or questionable when considered in a DC context.”
That’s still true, particularly for large plans, which often find institutional share classes of mutual funds are an even better bargain for participants than ETFs.