Sometimes failure represents a step in the right direction.

For fund investors, the failure of BlackRock’s target-date exchange-traded funds (ETFs) is a positive for two reasons: 1) It shows that fund investors may know — better than fund companies give them credit for — how to properly use ETFs, and 2) that fund companies are willing to shutter issues that aren’t worthy, rather than sticking with their bad ideas because they have found some consumers willing to buy.

BlackRock’s exchange-traded fund arm, iShares, recently announced plans to shut down its entire lineup of target-date funds in October, a move that will leave the ETF space with virtually no life-cycle/target-date offerings left.

Target-date funds are built to be a one-size-fits-all portfolio, and typically aim to serve investors of a specific age, providing them with a portfolio that ages with the owner, becoming more conservative as the shareholder nears and then enters retirement. Target-date issues have become hugely popular as a default choice for employees with retirement-savings programs; early this year, Morningstar Inc. reported that the total amount of assets in target-date funds had surpassed $650 billion, with some $50 billion of that money flowing into the investment style during 2013 alone.

Most of that growth has come out of three fund giants, the Vanguard Group, Fidelity Investments and T. Rowe Price Group TROW, +0.40% , companies that are known not only as fund managers but also as record keepers and providers of 401(k) and other retirement plans.

Exchange-traded funds, meanwhile, are effectively funds that are built to trade like stocks. They tend to be more cost- and tax-efficient than traditional funds, and have generally become the hot way to buy funds, with investors (and their money) increasingly favoring ETF options when they have a choice.

While mostly known for providing minute-by-minute access to index-based funds, ETFs have been branching out, and it was inevitable that someone would make a foray into the target-date space.

The question was whether investors would bite.

There are several key issues that make traditional funds the pick over ETFs in the target-date space. For starters, target-date ETFs trade with a brokerage commission, a significant disadvantage to buying a fund at no additional charge through a retirement plan. While many target-date ETF issues are now sold commission-free, it’s a worry for people sizing up their options.

The heavy use of target-date issues in retirement accounts negates the tax-savings advantage.

Perhaps more important in muting the acceptance of target-date ETFs is that most retirement plans don’t offer any way for savers to use exchange-traded issues, meaning that traditional funds are the only option for someone with a life-cycle or target-date choice in mind.

Thus, if they are going to use a target-date ETF, it will be with savings outside of the retirement plan. Not many investors took that route.

The iShares target-date series took in about $300 million in assets, but none of the funds had $100 million in total assets; most industry experts suggest that an ETF needs $50 million to be viable but $100 million to surpass the break-even point.

By comparison, BlackRock’s LifePath funds — its target-date vehicles built on the traditional fund chassis — have nearly $14 billion in assets.

But the big factor for investors when it came to the target-date ETFs is that investors typically use exchange-traded funds to take control of their portfolio, not to cede the power to a fund manager.

Todd Rosenbluth, director of ETF and mutual fund research for S&P Capital IQ, noted that instead of using a fund with a ready-mix, one-size-per-age-group fund, investors should use “low-cost, liquid equity and fixed-income ETFs…to fit an investor’s risk tolerance and time horizon.”

BlackRock, smartly, made the early decision to pull the plug; if the iShares target-date funds could not attract enough assets to generate real economies of scale, they were keeping shareholders in a kind of limbo. Most fund companies have no problem keeping small funds open, so long as they can collect fees the way a retiree gets checks on an annuity. If the fund world was a meritocracy, at least half of all issues — both traditional and exchange-traded — would be shuttered.

Ultimately, there may be someone else to step into the target-date ETF space, but it will be a long time before life-cycle options prove they can succeed there.

For now and the foreseeable future, this is a space of the investing world where the new product — the ETF — isn’t an improvement over the traditional offering.

“Building a retirement portfolio around a target-date ETF is like buying a car off the dealership floor without ever getting inside. It’ll probably work out pretty well overall, but will never be quite right,” said Michael Johnston, founder and senior analyst at ETF Database. “Investors would be much better off spending a bit of extra effort to determine an asset-allocation strategy that makes sense for them personally, and then finding the best ETFs to make that strategy a reality.”