Filed Under:Life Insurance, Life Planning Strategies

The best-kept secret in retirement plans

Reflecting ETFs' growing popularity, nearly two-thirds of advisors now use the index products as a core holding.
Reflecting ETFs' growing popularity, nearly two-thirds of advisors now use the index products as a core holding.

It’s been a long time coming: Mutual fund companies, as this Forbes article indicates, are now at war to offer to the lowest asset management fees. The ever-rising popularity of exchange-traded funds is a key reason why.

The growing demand for the passively managed ETFs — which come at lower cost than actively managed mutual funds — is reflected in the increasing number of 401(k)s, 403(b)s and other employer-sponsored retirement plans that offer the products. The trend is mirrored, too, in a Cerulli report showing that nearly two-thirds of financial advisors use ETFs as a core holding to cost-efficiently diversify clients’ portfolios.

Clearly, the stakes are high for mutual fund providers, who have much to lose if the investor exodus to ETFs continues apace. Further deep price cuts to the actively managed products are likely before the dust settles. And that’s good news for investors. 

—Warren S. Hersch
Although mutual funds have historically been the core investment vehicle associated with 401(k) plans, financial companies are beginning to offer 401(k) plans comprised solely of ETFs.

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