ETF Store Insight

ishares Putting Money in Your Pocket

May 14th, 2009 by Joe Massman

The announcement hasn’t received a lot of attention, but if you participate in a 401k plan, there was a recent news release from ishares that might help put money in your pocket.

To date, the penetration of ETF’s into corporate 401k accounts has been minimal at best.  ETFs offer 401k participants dramatically lower investment costs over most 401k options, and they also offer broad exposure to investments rarely found in those plans: commodities and other alternative assets.  However, the back office infrastructure (think recordkeeping and trading platforms) of the industry was built primarily for traditional mutual funds and it has been difficult to convince industry players to change the way they do business for investment options that were, until recent years, not in high demand.

How times have changed.

Enlightened HR and Finance executives who oversee 401ks are now pushing for ETFs and ishares is stepping up to meet the demand.

ishares will team up with some of the largest administrators, custodians, and technology providers to make it very easy for financial advisors to provide ETFs investment options inside the plans.  ETFs can be offered as exclusive options or alongside traditional mutual funds.

It is too early to tell whether the ishares initiative will be successful, but the bet here is that ETFs are getting ready to make a big move against mutual funds inside 401k plans – and put a lot of money in investors’ pockets.