The one area that has been slow for exchange traded funds (ETFs) is retirement accounts, however, a number of changes in the 401(k) world could boost ETF use. Ideally, what retirement did for the mutual fund world, it could do for the ETF market. The Pension Protection Act of 2006 encourages employers to enroll their workers in 401(k) plans automatically, and then give them protection if they roll it over into sound investments such as asset allocation funds. Ilana Polyak for InvestmentNews adds that last months congressional hearing exposed the high fees and lack of disclosure that some of the returns were being charged. A lot of plan sponsors are going to see the light on what they are actually paying for those plans.
This is where ETFs come in. ETFs have lower expenses and don’t participate in revenue sharing arrangements so there are no disclosure concerns. Once the problem of commissions and intraday trading can be resolved platforms will be able to offer ETFs.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.