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Fidelity-BlackRock Deal May Speed ETFs in 401(k) Plans


The Fidelity Investments and BlackRock expanded partnership made waves in the exchange traded fund business, but it may also influence the retirement account market as well.

The new deal could push more employers to work with Fidelity in including a self-directed brokerage option within their plans, reports Nicole Seghetti for The Motley Fool. [ETFs and Retirement Accounts]

“To the extent that iShares will be more readily available without transaction fees in those accounts through Fidelity, we think [self-directed brokerage accounts] will become a more attractive option for retirement investors.” according to BlackRock.

Fidelity is currently the largest 401(k) plan administration firm, accounting for 27% of the U.S. market share. While the firm claims that 38% of its 401(k) participants can take advantage of self-directed 401(k)s, less than 3% actually utilize the option.

Self-directed 401(k)s have been growing in popularity as investors find low-cost options to replace bulky mutual fund holdings. Last year, the Department of Labor enacted a new mandate that requires employers to provide more extensive fee information on 401(k) plans, which lead to rising interest in low-cost alternatives like ETFs.

However, due to the way ETFs trade throughout the day, there remains some technical issues that limit the fund offerings in 401(k)s. Still, there are some firms that are trying to work around the problem.

The new Fidelity and BlackRock partnership would help bring low cost iShares ETFs to Fidelity’s distribution channels, and ultimately, 401(k) participants would benefit from the lower fees and greater options in managing their own retirement accounts. [Fidelity, iShares Expand ETF Partnership: What Does it Mean?]

For more information on ETFs in retirement accounts, visit our retirement category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.