The chief executive of exchange traded fund provider FocusShares says the business will begin to make “significant inroads” in 401(k) plans as fees become more transparent.
However, some ETF experts think the financial products will have a tough time breaking into retirement plans due to administrative challenges and competition from traditional index funds.
FocusShares CEO Liik in an Ignites story posted Monday noted new regulations that go into effect in July will require plan sponsors to provide more disclosure on 401(k) account fees. [ETFs Eye 401(k) Industry]
“Of the $4.5 trillion in [defined contribution]plans, $2.5 trillion is invested in mutual funds … But we expect to see a greater percentage of those assets invested in ETFs in the coming years,” he said. “After all, most of the qualities that made mutual funds attractive 401(k) choices in the past, such as asset-class diversification, a wide array of investment choices, and easy-to-understand objectives, can be applied to ETFs.”
Yet Matt Hougan, managing director of ETF analytics at IndexUniverse, thinks there aren’t many incentives for 401(k) investors to choose ETFs.