Betterment, the robo-advisor with over 100,000 customers and $2.5 billion in assets under management, is bringing automated investing and exchange traded funds to the world of 401(k) plans.
“Betterment LLC on Friday said that starting early next year, it will offer companies an online-only 401(k) plan featuring a menu of 13 low-cost stock and bond exchange-traded funds from companies including Vanguard Group and BlacRock,” reports Anne Tergesen for the Wall Street Journal.
ETFs are still a small percentage of the massive U.S. 401(k) market, but gradual progress is being made to bring these funds to employer-sponsored retirement plans. Last year, discount brokerage giant Charles Schwab (NYSE: SCHW) said it will bring the advantages of exchange traded funds to 401(k) retirement plans.
Schwab Retirement Plan Services, a unit of California-based Schwab, has launched a full-service 401(k) program based on low-cost exchange-traded funds, according to a statement issued by the firm. Schwab’s 401(k) ETF effort comes after the 2012 launch of Schwab Index Advantage, which provides workers with low-cost index mutual funds and personalized advice. [Schwab Debuts ETF 401(k) Effort]
“Betterment expects 401(k) fees including the ETF expenses to range from 0.2% to 0.7% of assets annually—plus a one-time fee of about $1,500 for companies with less than $1 million in their retirement plans,” the Journal reports, citing Betterment CEO Jon Stein.
Betterment client currently have access to six equity-based ETFs and seven fixed income. All six of the equity ETFs available to Betterment clients are Vanguard funds while three of the fixed income offerings are iShares ETFs with the other four being Vanguard funds. https://www.betterment.com/portfolio/
Betterment’s ETF offerings currently include the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), Vanguard Value ETF (NYSEArca: VTV) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD).
TD Ameritrade (NasdaqGM: AMTD) has been offering ETFs to the 401(k) world for over four years, indicating that previous hurdles, including technological challenges, are falling by the wayside. [TD Ameritrade Solves ETF 401(k) Problem]
Advisrors and ETF advocates have been pushing for ETFs within retirement plans. ETFs have yet to break into 401(k) plans because of structural differences. 401(k) plans have been modeled around mutual funds for years, however, the trading aspect and the transaction fees incurred are the biggest hitch.