ETFs face challenges in entering the $12 trillion 401(k) market due to high institutional-level pricing of mutual funds and CITs. Intraday trading, tax benefits, and lack of demand are additional obstacles. Despite some target-date funds including ETFs, industry focus remains on mutual funds. Only 3% of target-date CITs hold ETFs.

While ETFs have found success in active-passive hybrid series, most target-date funds mainly use in-house ETFs. F/m Investments seeks SEC permission for dual share classes to add ETF options to defined-contribution plans. The company aims to offer mutual fund share classes of its ETFs to cater to growing demand from DC buyers. F/m is facing challenges in adding a share class that’s a different investment vehicle. The firm is working with fund administration and accounting to keep track of capital gains, update baskets in real time, and determine website content.

F/m is set to launch mutual fund shares for its F/m US Treasury 3-Month Bill ETF (TBIL) and Ultrashort Treasury Inflation-Protected Security ETF (RBIL). ETFs offer advantages like competitive dealer pricing and market maker bidding. This allows investors to choose the price they pay for shares.

For more financial advisor news, market insights, and practice management essentials, subscribe to The Daily Upside’s Advisor Upside newsletter. Dual share classes could potentially change the landscape of ETFs and 401(k) plans, offering new possibilities for investors.

Read more at Yahoo Finance: ETFs and 401(k)s Don’t Play. Could Dual Share Classes Change That?