While there are still cries for exchange traded funds (ETFs) to be a regular feature of 401(k) plans, one company is already enthusiastically incorporating them.
ING Direct’s ShareBuilder 401(k) plan focuses on small businesses of 1-50 employees. ShareBuilder actually launched its 401(k) plan in November 2005, and ING Direct took it over when they bought the company in November 2007.
Since ING Direct’s mission is to help lead Americans back to saving, it seemed like a good fit, says Stuart Robertson, head of ING Direct’s 401(k) unit.
“90% of small businesses with less than 50 employees don’t have a 401(k) plan – we can help people get their first 401(k) plan,” he says. ING’s mission is also about affordability, and ETFs seemed to fall in line with that philosophy.
But when the 401(k) was created, the decision to go with an all-ETF platform was not made willy-nilly: a number of different types of investment tools were considered before they saw that historically, indexing holds up better because of the lower expenses. They then looked at index mutual funds vs. ETFs and saw that ETFs come with even lower expense ratios.
“We knew we could put out a low expense product and eliminate transaction fees that will hopefully allow returns to be stronger over time,” Robertson says.
ETFs have yet to get the same share of the 401(k) market that mutual funds have, but there is plenty of time for this to happen.