Schwab unveils 401(k) product boasting index funds

Schwab unveils 401(k) product boasting index funds
In a much-anticipated move, Charles Schwab late on Tuesday said it is launching a 401(k) product that features index funds. An ETF-version of the low-cost offering, dubbed Index Advantage, is due next year.
JAN 19, 2012
The Charles Schwab Corp. announced late Tuesday the launch of a newly designed 401(k) product that offers low-cost index funds. Called Index Advantage, the plan will offer 40 funds covering about 16 asset classes, said Mike Peterson, a Schwab spokesman. The product will also have a bank-deposit savings option. The mutual fund lineup will include products from Schwab, as well as Vanguard, Dreyfus, Blackrock, TIAA-CREF, Principal and Columbia. Index Advantage will offer an advice option through GuidedChoice Asset Management, Inc., a third-party provider of investment advice and planning tools to retirement plan participants. Only about one in 10 employees takes advantage of professional advice today, Schwab said in a statement, despite evidence that advice helps boost savings rates. Schwab expects to land its first client for the new plan later this quarter. Similar to Schwab's existing bundled 401(k) packages, Index Advantage is not available to the independent RIAs who custody at Schwab. The company is developing a version of Index Advantage that will use only exchange-traded funds. The ETF-only platform will be available sometime next year, and is expected to have even lower costs, Mr. Peterson said. The combination of low cost with advice is unique, said Jim McCool, executive vice president and head of Institutional Services at Schwab, in a release. "No major 401(k) provider has offered this type of approach, until now,” he said. Employers will also have the option of providing employee participants a self-directed brokerage account through Schwab. The Index Advantage offering comes from Schwab Retirement Plan Services, Inc., a 401(k) provider to approximately 1.5 million workers with about $90 billion under administration.

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