Illinois' Treasury acts to boost visibility of 529 plans

One of the bright spots in an otherwise difficult year for the Section 529 college savings plan industry has been the aggressive efforts of Alexi Giannoulias, Illinois' dynamic young state treasurer, to boost the visibility of college savings both in his home state and across the country. "He's one of the most innovative treasurers in the country when it comes to 529 plans," said Peter Mazareas, vice chair of the Washington-based College Savings Foundation and chief executive of Nahant, Mass.-based Strategic Advancement Group Inc. "He's progressive, creative and is leveraging his office to advocate 529 college savings as good public policy for the state." Mr. Giannoulias, 32, who is based in Chicago, is focusing on countering the debilitating impact of the financial crisis on college savings. Net sales for 529 plans fell by more than 33% to $6.3 billion, from $9.8 billion during the first half of 2007, according to Boston-based Financial Research Corp. — a decline expected to have accelerated in the third quarter.
"People don't have the money to put into 529 plans now," said Mr. Giannoulias, who oversees the Chicago-based Bright Start College Savings Program, which has approximately $1.2 billion in assets. "Putting food on the table and paying the bills are the priority now. Our No. 1 challenge is to get parents to make saving money for college a long-term priority."

INNOVATIVE MARKETING

To that end, Mr. Giannoulias spearheaded an innovative marketing campaign for Bright Start this year based on real home videos of the travails of parents dealing with rambunctious children. One television commercial, broadcast throughout Illinois beginning in May, features, for example, a home video of small children in pajamas jumping up and down on a bed. The caption on the screen reads: "Bedtime is hard. College savings doesn't have to be." Another commercial in the series shows a video of kids at a table throwing food at each other as the caption reads: "Lunch is hard. College savings doesn't have to be." Developed by Two by Four, a Chicago ad agency, the campaign also features a $1,000 Bright Start scholarship to a child featured in a winning home video. A commercial featuring that video began airing late last month and will continue to be shown through next summer. The campaign has drawn praise throughout the industry, including the director of 529 college savings plans for Bright Start's program manager, New York-based OppenheimerFunds Inc. "As a parent of two young children, I identified with the difficulties of raising a family," said Raquel "Rocky" Granahan, who is also a senior vice president for OppenheimerFunds. "I laughed at many of the videos because I have walked a mile in those parents' shoes." Responding to the market volatility of the past two months, OppenheimerFunds and Mr. Giannoulias' office have also sent out letters to Bright Start account holders urging them to continue their long-term college savings objectives. At industry conferences, he has been a leading proponent of a national marketing campaign to promote 529 college savings plans, an idea which has been hotly debated in the industry for several years. Some in the industry have advocated for a "Got Milk?"-type of national campaign to promote 529 plans, while others have argued that marketing dollars are better spent locally. "I don't see any downside to a national campaign, and I think it could be very beneficial to get the message out, especially now," Mr. Giannoulias said. However, he acknowledged that financing such a campaign — a sticking point in the past — has become even more challenging in the wake of the financial crisis. "It's tough to find funds anywhere now," Mr. Giannoulias said. "If it's going to get done, it has to be a team effort." Mr. Giannoulias is also sympathetic to a movement in the industry to lobby the Internal Revenue Service to change its rule limiting asset allocation changes to a 529 account to once a year. "In a perfect world, the rule should be changed," he said. "But it's not always the easiest thing to do. An unlimited ability to make changes, for example, would put an extra strain on the states for service. Ideally, I think making one change per quarter is fair and reasonable." Statewide, Mr. Giannoulias hasn't been shy about leveraging the power of his office to help promote the state's college savings programs. This year, he introduced scholarships for children of state residents in the armed services who were killed in combat. Also, Mr. Giannoulias created a Bright Start MasterCard giving participants rebates on purchases that are deposited into their 529 accounts. And last month, he worked with transit agencies and secured free advertising for Bright Star on bus routes in Chicago and the surrounding suburbs. "We agreed that it was an important public service," Mr. Giannoulias said. "One thing that's different about Alexi is how he has made college savings such a high priority and has personally promoted it throughout his state despite his other responsibilities," said Jackie Williams, executive director of the Ohio Tuition Trust Authority in Columbus and a former chairperson for the Lexington, Ky.-based College Savings Plan Network. Indeed, Mr. Giannoulias signaled his interest in college savings immediately after being elected treasurer in 2006.

NEW CONTRACT

He quickly negotiated a new Bright Start contract with OppenheimerFunds, which resulted in reduced fees, more fund options and $3.5 million in scholarships for Illinois students. "He's a tough and fair negotiator," said Ms. Granahan. "He tries to do the right thing for Illinois residents and puts the interest of Illinoisans first." Mr. Giannoulias traces his advocacy for 529 programs to his own parents. "They were Greek immigrants who worked very hard and made saving for college a priority," he said. "I think anyone who takes the time to learn about 529 college savings programs, and the tax benefits they offer and the discipline they encourage to start saving early for college, will come to the same conclusion I did: They are phenomenally important." What's more, Mr. Giannoulias confided, his enthusiasm for college savings plans is shared by his friend, political ally and basketball teammate, president-elect Barack Obama. "Few things are more important to Barack Obama than higher education," Mr. Giannoulias said. "529 programs will have a sympathetic ear in the White House." E-mail Charles Paikert at cpaikert@investmentnews.com.