Many ETFs offer tax efficiency because of their structure. This is not a relevant feature of a tax-deferred retirement plan, such as a 401 (k). ETFs are similar to mutual funds. If your 401 (k) options include an ETF (or any investment fund) that you consider a good choice, there's no reason not to choose it.
One of the first arguments generally made against ETFs in 401k plans is the concern based on fiduciary duty. Offering ETFs should pose no problem with fiat rights any more than any other investment option. The fiduciary obligations that plan sponsors and other trustees owe to plan participants are based on the Employee Retirement Income Security Act of 1974 (ERISA). Gottfried goes on to say that ETFs don't pose problems natively to prevent them from being used in retirement plans.
In fact, Betterment is one of several providers that have created their own record-keeping and custody platforms for a 401 (k) comprised exclusively of ETFs. However, it's possible to invest in ETFs in your 401 (k) plan, and some providers have moved on over the past five years. Apple is not only innovative in the technology sector, but it is also innovative in the way it manages the company-sponsored 401k retirement plan. If your company doesn't offer ETF options and you want them, check to see if your plan offers a brokerage window within the 401 (k) plan.
While it declined to specify only a small part of the company's total 401 (k) business, the company is optimistic about future prospects. For a company to decide between offers, one key is to consider its objectives, says Steve Schweitzer, senior vice president of products and marketing at Ascensus, a provider of 401 (k) plans. As the decade draws to a close, ETFs hold more than four times that amount, according to the Investment Company Institute. ETFs are gaining ground in the general market and companies like Betterment are at the forefront of offering ETFs.
Dan Egan, director of behavioral finance at online investment firm Betterment, says that one thing that prevents other providers from moving from mutual funds to ETFs is the way they are paid, partly through commissions from investment fund companies. Even if a company can use a general account to keep records, the total costs with mutual funds are likely to be at least comparable, if not lower, to those of ETFs. At Betterment, ETF options are included in Betterment for Business's 401 (k) plan, which now has a waiting list for small businesses that want to add the platform.
