The move is huge for the ETF industry, which has been trying (and slowly succeeding) in cracking this market. There’s an estimated $3 trillion in 401(k) assets, and naturally, the ETF industry would like a bigger chunk of that.
The fear among naysayers has been that some 401(k) investors would trade all day, every day, but some employers may opt to limit such active trading if they add the plan to their rosters.
Schwab’s 401(k) plan is timely, since Congress has been closely eying the fees and expenses that mutual fund-based 401(k) plans charge. If Schwab can introduce a plan that saves people serious money, combined with the fact that ETF commissions are shrinking fast, the industry could be looking at moving well beyond its current $1 trillion in assets.
A slowly but surely growing number of others already offer all-ETF 401(k) plans, including BlackRock and ShareBuilder 401(k), which we use for our employees.