U.S.-listed exchange traded funds (ETFs) recently hit $1 trillion in assets. Now that that’s done, instead of dusting off its hands, the industry is turning its eye to the next trillion and where it might be found.
Plain and simple, investors are sick and tired of being fee’d to death.
For that reason, Dave Nadig for Index Universe feels that it might be found in the 401(k) industry, a segment that ETFs have long been trying to fully crack.
That’s because the mutual fund industry charges 12(b)1 fees, which is a fee passed along to investors that allows the funds to recoup expenses for servicing the fund. Once a murky area little understood by ordinary investors, fees are now rightly getting the scrutiny they deserve, and investors aren’t happy. [Retired? How To Cope With A Bond ETF Bubble.]
Enter ETFs. They’re clear, easy to understand and there’s no mystery about what you’re paying for. On top of that, most ETFs are passively managed to track an index, so you won’t be paying handsomely for the typical underperformance of actively managed mutual funds. Fee disclosure rules could further lift the veil on what mutual funds are charging.
Record-keeping is the only thing holding back ETFs from truly breaking into the 401(k) market, but several 401(k) plan providers, including ShareBuilder 401(k) and Invest n’ Retire, have proved that this hurdle can be easily overcome.
Tisha Guerrero contributed to this article.
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.