TD Ameritrade (NasdaqGM: AMTD) has been offering ETFs to the 401(k) world for over three years, indicating that previous hurdles, including technological challenges, are falling by the wayside. [TD Ameritrade Solves ETF 401(k) Problem]
However, issuers and brokerage firms looking to increase ETFs’ presence in the 401(k) market face other issues.
For example, some of the largest U.S. mutual fund providers, some of which are also big-name ETF issuers as well, contend that many U.S. workers have access to low cost index mutual funds in their employee-sponsored retirement plans.
That is true, but the assertion is ignorant to the fact “a lot” and “many” are far different from “a vast majority” and “all.” Many workers are still afflicted with either limited fund choices, only high fee options or an unappealing combination of both. The fact is all workers deserve access to low fee products in their retirement plans, but all workers do not currently enjoy such access.
Then there is the maddening assertion that ETFs in 401(k) plans will turn everyone from paralegals to engineers to McDonald’s managers into day traders.
Remember that 25 years ago (ETFs did not exist in the U.S. then) critics also asserted updating 401(k) balances daily rather than quarterly would lead to increased trading. That never materialized and there is no empirical evidence to suggest that simply because a worker has the ability to trade his or her retirement account more frequently means they will exploit the opportunity. After all, those workers do have jobs to tend to. [Low Fees Suport ETF 401(k) Push]