“These methods to incorporate ETFs likely come at substantial administrative costs,” according to a Cerulli report on the survey. “A large ETF sponsor expressed that firms will have to come up with a way to offset these expenses similar to 12b-1 fees charged by mutual funds. Otherwise, significant traction in the 401(k) market will not occur.”
However, Charles Schwab is working on an all-ETF program for 401(k)s, similar to the Schwab Index Advantage program. Steven Anderson, executive vice president of Schwab Retirement Plan Services, will offer commission-free ETF trades for 401(k)s with assets ranging from $20 million to $5 billion.
ETFs “will play a more dominant position over time (in DC plans) — but not immediately,” Anderson said.
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Max Chen contributed to this article.