Steve Anderson, Executive Vice President Of Schwab Retirement Plan Services (Photo: Business Wire)

Schwab Retirement Plan Services, Inc., a national 401(k) service provider to approximately 1.3 million workers saving through company retirement plans, has become the first major firm to launch a full-service 401(k) program based on low-cost exchange-traded funds.
Steve Anderson, Executive Vice President of Schwab Retirement Plan Services (Photo: Business Wire)

Steve Anderson, Executive Vice President of Schwab Retirement Plan Services (Photo: Business Wire)

“We believe workers can and should get more value from their 401(k)s,” said Steve Anderson, head of Schwab Retirement Plan Services, Inc. “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.”

Anderson estimates a 401(k) plan 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 mutual funds, and by more than 30 percent compared to a 401(k) plan that uses index mutual funds. 1

Several employers have already expressed strong interest in becoming first adopters of the exchange-traded fund version of Schwab Index Advantage. Given the typical 6-12 month sales and implementation cycle in the 401(k) industry, the firm anticipates clients will be offering this new version of Schwab Index Advantage to their employees later this year.

Key Benefits

Exchange-traded funds offer a number of benefits to investors that will now be available through Schwab Index Advantage, including low investment costs, a broad range of asset classes, transparency and timeliness of trades.

“Using a patent-pending process, Schwab Index Advantage is the first 401(k) program that fully integrates exchange-traded funds as core investments within the plan, including commission-free intraday investing along with the ability to process partial share interests,” Anderson said. Many solutions on the market today unitize shares, batch trades, trade only once a day at a single price, or require individuals to open a self-directed brokerage account to access exchange-traded funds. “We believe a truly effective offering requires the ability to invest in and receive allocations of both full and partial shares of exchange-traded funds when the market is open, and that’s what we’ve built. Other 401(k) offerings that we’ve seen take a less comprehensive approach to including exchange-traded funds and also tend to serve smaller plans,” he added.

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