Schwab ETF 401(k) platform has hiccup

The Charles Schwab Corp.’s long-awaited ETF platform for 401(k)s — widely forecast to launch in the fourth quarter — has hit a regulatory speed bump.

The offering has run into a snag with regulators, according to Steve Anderson, executive vice president at Schwab Retirement Plan Services.

He declined to share the precise details of the matter but noted that some of the work that the firm is doing on the platform relates to the nature of the investments.

“To use ETFs appropriately in the intraday market, you want to be able to trade with fractional shares, and these don’t have them,” Mr. Anderson said. “We have to find a way to accommodate that.”

Retirement plan sponsors and the rest of the industry have been awaiting the release of the ETF-based platform since 2011, when Schwab announced its efforts to make 401(k) investing cheaper for plans and their participants.

The company launched Index Advantage, an index-fund-based platform, last year and has since lined up close to 80 clients who want to switch over to the cheaper structure, according to Mr. Anderson.

A recent report from IndexUniverse LLC quoted Dave Gray, vice president of client experience at Schwab, as saying that the platform will be delayed and that the issue isn’t related to fractional shares.

“At this point, we’re not committing to a particular time, whether it’ll be at the end of this year or otherwise,” he told IndexUniverse.

Mr. Gray said that Schwab has developed its own approach to fractionalizing exchange-traded funds.

Mr. Anderson declined to comment about Mr. Gray’s comments to IndexUniverse but said that the ETF platform is rolling along just fine.

“I can see us being aggressively in the market in the next couple of months,” Mr. Anderson said. “We want to make sure that we have the regulatory bodies aligned with what we’re doing here, and we think we can work through that relatively soon.”

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