States that have Section 529 college savings plans and the financial services companies that manage them are working overtime to make sure that advisers — who account for about 80% of their sales — remain interested in the product during the recession.
"What's most important now is to talk to financial advisers and work with them. We're telling them to stay in front of clients and don't wait for them to call you," Brian Houston, retirement national ac-count manager for Atlanta-based Invesco Aim's institutional business development division, said at the College Savings Foundation's an-nual conference in Miami last month.
The Washington-based foundation is an industry advocacy organization. Its members are primarily financial services companies that have business interests in 529 plans.
Invesco co-manages Nebraska's Aim College Savings Plan with Union Bank and Trust Co. of -Lincoln.
In a recessionary environment marked by rising unemployment and crushing stock market losses, the 529 industry knows that it faces an uphill battle.
In a survey of foundation members released at the conference, just 28% of the 43 respondents said that they thought the level of advisers' commitment to selling 529 plans in the field was increasing, compared with a year ago when 51% said they thought advisers' commitment to the programs was rising.
"Advisers are facing a head wind right now. Investors don't want to part with their money at all, and if so, they're nervous about putting it in the market," said Jeffrey Coghan, assistant vice president and director of 529 programs for Simsbury, Conn.-based Hartford Life Insurance Co., which manages West Virginia's Wheeling-based family of Smart 529 college savings plans.
Nonetheless, he and other program managers said that the recession also presents financial services companies and advisers with a good opportunity to sell 529 plans.
"We do see this as an opportunity," Mr. Coghan said. "It's an area that advisers can focus on with clients as they look at their priorities right now."
To make things easier for advisers, Mr. Coghan said, last week Hartford introduced a new electronic application process for new accounts for the Hartford Smart529, West Virginia's prepaid tuition plan. Hartford is working with broker-dealers to institute the new electronic application system, which is based on technology from New York-based National Securities Clearing Corp., he said.
MARKETING EFFORTS
Hartford is also sending advisers new marketing material for its conservative stable-value fund, Mr. Coghan said.
In Montana, advisers who sell the fixed-income products offered by the Trenton, N.J.-based College Savings Bank for the state's Helena-based Guaranteed Student Loan Program are now receiving a fee of 0.25 percentage points per year to maturity, up to 4%, for every instrument they sell, said Sue Mohr, education savings analyst for the program.
"Advisers are reacting very positively," she said.
And in January, Ms. Mohr said, the Montana Board of Regents' Oversight Committee for the Helena-based Montana Family Education Savings Program approved adding on one-year and three-year "plain vanilla" certificates of deposits in response to "so much growing interest in these products."
Advisers who have client assets with New York-based OppenheimerFunds are being informed by the company about their "rights of accumulation," said Bill Raynor, vice president, 529 institutional sales and client service manager for New York-based Oppenheumer Funds Private Investments Inc.
Clients who have more than $1 million in OppenheimerFunds won't have to pay an upfront sales fee if they buy one of the company's 529 plans, he said. Clients with less than $1 million in any OppenheimerFunds fund will pay a reduced fee, depending on their level of assets.
OppenheimerFunds is also hosting a series of events for advisers and clients, as well as town hall meetings, to provide a forum for questions about developments in the financial markets and college savings plans.
"It's time for a true consultative approach. Advisers have to show the value of a 529 plan," Mr. Raynor said.
"They can't sell the hot fund anymore," he said. "They have to provide true expertise."
REACHING OUT
Boston-based John Hancock Funds LLC, which distributes Alaska's Fairbanks-based John Hancock Freedom 529 Program, has also begun reaching out to advisers, sending them the first in a series of white papers on the benefits of 529 plans last week. The firm will also begin sending monthly e-mails to advisers with ideas about how to talk to clients about college savings plans, said Carey Foran Hoch, senior vice president and head of retail marketing for John Hancock.
"It's easier for advisers to talk about college savings now because it's not as depressing as other things," she said. "We're getting more requests from advisers about 529 plans, and we think it will increase as the financial crisis continues."
E-mail Charles Paikert at [email protected].
