When Will ETFs Hit 401(k) Plans?

Somebody doesn’t want exchange traded funds (ETFs) in their retirement space. Although ETFs’ growth remains rapid, they’ve made little headway into the 401(k) marketplace. This access would give the ETF industry a huge new pool of investor money. The 401(k) market helped give mutual funds better earnings and higher profiles, and many believe it would do the same for ETFs. So what gives?

Some ETF providers blame mutual fund companies for the resistance, claiming it would cut into the same competition. Remember, ETFs generally charge lower fees than mutual funds. Diya Gullapalli for The Wall Street Journal reports that purveyors of mutual funds claim there is virtually no demand from plan sponsors for these investment vehicles. Many of the coveted ETF features, such as intraday trading and tax efficiency, give no true benefit to a retirement plan. Nonetheless, ETFs in the retirement industry is one of the hottest topics lately. It’s on the agenda of nearly every ETF provider’s meeting. It’s not so much a question of "if" it will happen as it is "when?"

In the meantime, you can help. Shoot an e-mail to your human resources manager that says, "I think our company should consider offering exchange traded funds (ETFs) in our 401(k) plan."