T.D. Ameritrade is opening more doors into the highly anticipated exchange traded fund (ETF) 401(k) business. Their new investment program is allowing plan sponsors to offer ETFs within a retirement plan.
“With this 401(k) solution, we’ve made adding ETFs as an investment option to a retirement plan easy and affordable,” said Skip Schweiss, president, TD Ameritrade Trust Company. [Schwab On Schedule for ETF 401 (k) Launch.]
TD Ameritrade client usage of ETFs has increased more than 30% annually for the past two years. Even with the increasing popularity of ETFs, adoption of ETFs in 401(k) retirement plans has been low, mainly due to technical and back-office challenges.
The provider has simplified operations for record keepers by developing a trading process that mirrors mutual fund trading and is consistent with their current procedures. This process also includes the ability to trade fractional shares of ETFs. In addition, per-share fees and transaction fees are eliminated for 401(k) plans on the TD Ameritrade Trust Company platform, which can provide potential cost savings to plan participants and eliminate the reconciling component for record keepers.
Record keeping is the only thing holding back ETFs from truly breaking into the retirement-plan market, but several 401(k) plan providers are working around this obstacle. [Not Enough For Retirement? Here’s What You Can Do.]
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.