Apple Makes The Move to All-ETF Retirement Plans


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Apple (Nasdaq: AAPL ), the largest U.S. company by market value, is once again setting a standard for innovation, but this time the innovation isn't coming by way of the iPhone, iPad or Apple TV. Rather the company is making the move to an ETF-only retirement plan for its employees .

While the exchange-traded products has grown by leaps and bounds in recent to almost 1,470 total products with over $1.13 trillion in assets under management at the end of May, ETFs still are not prominently used in in company-sponsored retirement plans such as 401(k) plans. That market is still largely dominated by mutual funds.

At the end of 2010, ETF assets in 401(k) plans were scant at just $5 billion, or 0.2% of total assets, compared to $1.8 trillion, or 58% of 401(k) assets, according to Cerulli Associates. However, some firms are pushing the ETF/401(k) issue. For example, ExpertPlan announced that it will add more than 900 ETFs, including those offered by Barclays, Claymore, First Trust, iShares, Rydex and Wisdomtree, according to ETF Trends .

Charles Schwab (NYSE: SCHW ), the eleventh-largest U.S. ETF sponsor, has been working on an ETF-only 401(k) plan that would use index-based ETFs. Capital One's (NYSE: COF ) ING Direct offers index ETFs in its Sharebuilder 401(k) plan, and T.D. Ameritrade (NYSE: AMTD ) also includes ETF options in its 401(k) plan, ETF Trends noted earlier this year .

But the move by Apple, not only the largest, but the most innovative U.S. company in the eyes of many, to all-ETF retirement plans stands as the strongest endorsement to date of the utility of ETFs when it comes to retirement planning.

At the very least, Apple embracing ETFs for employee retirement plans could motivate other companies to consider the idea as well. Employees can only hope that's the case because for now, there's still plenty of asinine information in the marketplace regarding ETFs and 401(k) plans.

Two so-called experts cited in this piece by Employee Benefit News with their comments imply that ETFs are reserved only for highly sophisticated, active traders.

David Wray, president of the Plan Sponsor Council of America, said in the Employee Benefit News piece "ETFs are designed to be traded" and to teach unsophisticated investors about ETFs "is a daunting project."

Maybe those allegedly novice, unsophisticated investors would like to know that the average mutual fund had fees of 0.75% last year, which is well above the average for ETFs . All those added fees make a difference over the long-term. Duh.

For now, let's just say kudos to Apple for seeing through the misinformation and for giving their employees the chance to use ETFs over antiquated mutual funds.

*The opinions expressed here are my own and do not represent those of Benzinga or any other outlet where this story may be viewed. Please feel to contact me for a cordial debate on this subject or just to ask questions. Follow me on Twitter: @ETFProfesor1

(c) 2012 Benzinga does not provide investment advice. All rights reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , ETFs , US Markets
More Headlines for: AAPL , AMTD , COF , SCHW

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