Will the recent deal to make 65 BlackRock ETFs available commission-free on Fidelity’s brokerage platform mean greater exposure for ETFs in 401(k) plans? According to Tom Lydon of ETF Trends and Nicole Seghetti of The Motley Fool, that may be the case.
As the leader in the DC market, Fidelity can force other providers to follow if they think Fidelity has a distinct product advantage. For example, Schwab recently announced 105 commission-free ETFs, none of which are from BlackRock.
Though the main battleground over commission-free ETFs is being played out in the retail market, the war may trickle over into the retirement market, including IRAs.
The use of ETFs in DC plans has been muted due to trading issues, which can be easily fixed. However, recordkeepers have not adjusted their trading platforms due to limited demand and a plethora of index funds available. But with commission-free ETFs available through a brokerage window and the soon-to-be-launched all-ETF platform by Schwab, all that may change.
While ETFs have gained popularity among individual wealthy investors, 401(k) plans have stuck with mutual funds and TDFs. Fidelity, the king of both categories, is toying with the idea of using managed accounts with ETFs as the underlying investment — which could catch the fancy of many 401(k) investors focused on fees.
