ETF Trends
ETF Trends

This news should cheer investors who want to see a wider array of all-exchange traded fund (ETF) 401(k) plans on the market: discount brokerage and ETF provider Charles Schwab is getting in on the action.

Schwab President and CEO Walter W. Bettinger II told a group of advisors recently that the firm has been hard at work on the launch of an all-ETF 401(k) plan in early 2012, says Lisa Shidler at RIABiz.

In keeping with Schwab’s low-cost ethos, its plan would save participants between 35% and 85% off a mid-sized plan, Bettinger said.

Schwab isn’t the first-mover in this growing space, but when the plan launches, it will be the biggest player by a long shot.

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.

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.