Charles Schwab (SCHW) said Wednesday that its Retirement Plan Services unit will now offer retirees — via the retirement plans that serve them — an ETF-only 401(k) plan.
The plan will include about 80 ETFs from 11 different providers, including Vanguard, State Street and iShares, along with Schwab’s own proprietary ETFs.
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The announcement comes one year after the company’s launch of Schwab ETF OneSource, which offers advisors and retail investors commission-free access to 105 ETFs from six big ETF providers. (At the time, Schwab said an ETF-focused platform for retirement plans was in the works.) It also comes two years after Schwab rolled out a retirement menu based on Schwab Index Advantage mutual funds.
“It’s very accurate to say, this is the same philosophical approach [as with the Schwab Index Advantage mutal funds] and the same mechanics but using ETFs,” said Steve Anderson, head of Schwab Retirement Plan Services, in an interview with ThinkAdvisor.
Retirement plans, which have a sales cycle that last at leaset several months, should be offering them to investors before year end, Anderson notes.
According to the company, investors using index exchange-traded funds can reduce their investment 401(k) expenses by more than 90 percent vs. using actively managed mutual funds and 30 percent compared with index mutual funds.
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Schwab, along with rivals such as Vanguard and Fidelity, have been fighting to attract as many retirement plan sponsors and retirees as possible to its platforms and products over the past few years.
Schwab says about 1.3 million workers save through its retirement products, services and plans, while Vanguard says it provides investments to roughly 4,000 defined contribution plans that cover some 3.5 million participants.
It says some advantages of its new ETF platform for investors include intra-day trading, along with the option of working with Morningstar or Guided Choice–or using a self-directed brokerage account.
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