Fundsters interested in 401(k) plans may want to take a look at this morning's Wall Street Journal. Ari Weinberg reports on the obstacles facing widespread adoption of ETFs insides 401(k)s and other retirement plans. Even ETF titan iShares, part of BlackRock, only has $2.7 billion of its $352 billion in ETF assets (i.e. only 0.77 percent) inside 401(k)s.

With input from retirement plan lawyer Ary Rosenbaum, financial planner Roger Wohlner, iShares product strategy managing director Darek Wojnar and an exec from a plan sponsor who uses ETFs inside its 401(k), the WSJ lays out several obstacles.

First, index mutual funds can be similarly low-cost and are already available via many 401(k) platforms. Second, most 401(k) plans only allow their investors -- called "participants" in the 401(k) business -- to trade once a day, not within the market day, negating the intraday trading benefit of ETFs. Third, 401(k)s are already tax efficient and don't need a boost in that department from ETFs. Fourth, ETFs are "tricky" to recordkeep and administer inside of 401(k)s. Fifth, larger plans have access to other investment options -- very low-cost mutual funds, collective funds and even separate accounts -- that are very cheap, and smaller 401(k) plans often depend on 12b-1 fees, which ETFs lack, to pay for 401(k) plan advisory, administration and recordkeeping services, and more.

The WSJ cites several ETF 401(k) providers, including 3D Asset Management, Ascensus, Folio Investments, ING and iShares. 

Edited by: Neil Anderson, Managing Editor


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