Is there a chance that ETFs might break into the 401(k) business? CNBC columnist Neil Plein says the existing resistence, based on low returns for advisors and institutions, might change with a new payment system.
Plein, of Invest in Retire, says there's been little progress in the past because of the difficulty of handling fractional share purchases — and that advisors believe they'd make less money using ETFs.
Plein points to a new system pioneered by Darwin Abrahamson which splits the 401(k)s' basis points more evenly: While the average 401(k) charges about 150 basis points, Abrahamson did a presentation at the IndexUniverse Inside ETF conference where he said he could do ETF model portfolios at an average cost of 70 basis points.
Recommended For You
Under Abrahamson's system, 20 basis points would go to the ETF company — Vanguard, BlackRock, etc. Another 15 basis points would go to the investment manager, 25 to the record keeper, and 10 for the custodian and any third party administrators.
Abrahamson's firm is the record keeper and provide the trading platform.
The firm has just received a patent on a system for managing ETFs in retirement plans, which also addresses the problem of fractional shares, with their first clients signed up already. Other firms, including ScottTrade and Schwab may licence their technology.
Read the full story here.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
