With news that Schwab intends to be in the all-ETF 401(k) market only means good news for those who believe that exchange traded funds (ETFs) will get a bigger foothold in the 401(k) market. While I have been skeptical of ETFs in 401(k) plans being just a niche player, I am very supportive of anyway that ETFs can increase their foothold in the industry because it offers competition in an industry that has been dominated by the mutual fund industry. Competition has a way of decreasing costs and for plan participants, that’s a good thing.
I think Schwab’s move is very proactive because I believe that full fee disclosure will increase the appeal of ETFs. My only concern why ETFs won’t be a dominant player within the 401(k) industry because most of the no fee transaction trading platform for 401(k) plans are controlled by mutual fund or insurance companies who have less incentives for ETFs to increase their exposure.
ETFs will get a bigger foothold in the 401(k) industry because of wider distribution and wide demands by plan sponsors, participants, and financial advisors. What will happen? We shall see.
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