Schwab adds ETFs to its 401(k) menuNews added by Benefits Pro on February 11, 2014

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By Paula Aven Gladych

Schwab Retirement Plan Services Inc., finally pulled the trigger on its plan for a 401(k) platform based solely on exchange-traded funds.

Exchange-traded funds are an easy way for investors to jump into alternative investments.

When the company made the announcement last week, many people in the industry said they would believe it when they see it. Schwab announced more than two years ago that it would develop an ETF-based 401(k) platform but has never rolled one out.

The plan was to offer the company’s 401(k) plans an even lower fee option than what the company already offers.

“We believe workers can and should get more value from their 401(k)s,” said Steve Anderson, head of Schwab Retirement Plan Services. “In 2012, we successfully launched Schwab Index Advantage, designed to help workers better prepare for retirement using low-cost index mutual funds and personalized advice. We are now launching an additional version of Schwab Index Advantage with the goal of further driving down investment costs by using low-cost exchange-traded funds.”

Schwab expects the first users of the platform to be onboard by the end of 2014. Anderson said he believes using index exchange-traded funds can reduce investment expenses by more than 90 percent compared to a typical 401(k) plan that primarily uses actively managed funds, and by more than 30 percent compared to 401(k) plans that use index mutual funds.

The company touted that it is the first major firm to offer this type of full-service ETF-based 401(k).

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