As the Section 529 college savings plan industry this month enters its most important marketing period, it has turned a blind eye to the unsettling events of the past 12 months.
As the Section 529 college savings plan industry this month enters its most important marketing period, it has turned a blind eye to the unsettling events of the past 12 months.
Translation: A 20% drop in the stock market since last September will go largely unmentioned in marketing efforts.
Instead, marketing materials for College Savings Month will, for the most part, emphasize overall awareness of the plans and such familiar themes as the need to save for college, rising tuition costs and the importance of a college education.
Marketing professionals, however, question the wisdom of not acknowledging the financial downturn and turbulent markets that have affected so many American families.
“I think by just sticking their head in the sand, [529 plan marketers are] missing an opportunity to build trust,” said Dave Swanson, founder and managing principal of SwanDog Strategic Marketing LLC in Warrenville, Ill. “Everyone knows what a bad year it's been. But to just leave that discussion to advisers is a mistake. Everyone talks about transparency, and here's a situation where you can acknowledge the obvious — that it was a really tough year — and say, "Here's what we're doing about it,' and build brand loyalty.”
The 529 industry's challenge is to “acknowledge investor concerns while still appropriately informing them about the benefits of 529s,” according to Jennifer Connelly, president of JCPR Inc., a Parsippany N.J.-based public relations and marketing firm specializing in financial services.
Industry executives argue that they are doing just that.
SEES NO NEED
“We don't believe there's a need to do a dramatic re-branding or repositioning,” said John Heywood, principal in the retail-investor group of The Vanguard Group Inc. “The message that saving for college is a good thing and that costs are escalating resonates in good times and bad.”
Jeff Troutman, vice president of college savings for Fidelity Investments' registered-independent-adviser unit, also believes there's no need to address the market drop.
“We think the issue is implicitly addressed as we talk to advisers about the need to get clients back on track and acknowledge how overwhelming the college bill can be,” he said.
Financial experts said the industry's decision to downplay the troubles of the past year and instead try to increase the overall appeal of 529 plans makes sense.
“I don't think they need to apologize for what the markets have done in the past year,” said Joe Hurley, president and chief executive of Pittsford, N.Y.-based Savingforcollege.com LLC. “In fact, many 529 plans did a great job. The need for more general awareness is much more important.”
Noting that a rising number of 529 beneficiaries are reaching college age, the industry needs to cast a wider net to appeal to a broader demographic, said Bridget Beardon, research analyst for Financial Research Corp.
“The beneficiary base is maturing, and they need to replenish it with more families and younger families,” she said.
She cited the Virginia College Savings Plan's sponsorship of a Nascar race at the Richmond International Raceway this Friday as a prime example of appealing to a broader audience.
In fact, the Virginia 529 College Savings 250 will be seen by an estimated 300,000 people at the raceway and millions more on television.
“We want to get out in front of as many people as we can, and we felt that the race was a good fit to reach a wider demographic,” said Mary Morris, executive director of the Virginia College Savings Plan, the nations' largest, with about $24 billion in assets.
Vanguard, which provides investments to 24 college savings programs in 23 states with more than $22 billion in assets combined, is also “a strong believer” in broadening the plans' appeal, Mr. Heywood said.
This month, he said, Vanguard will partner with New York's 529 College Savings Program plan to distribute homework folders with 529 marketing material to children from low- and moderate-income families across the state.
In addition, the company will distribute 529 marketing at state fairs in New York, Iowa and Missouri, and sponsor a college-planning seminar at a charter school in St. Louis.
John Hancock Financial Inc. focuses its national 529 marketing on financial advisers who sell Alaska's John Hancock Freedom 529 Plan.
Clients' retirement and college savings priorities haven't changed, despite the financial downturn, said Carey Foran Hoch, Hancock's general manager for college savings.
Consequently, Hancock's marketing this fall will stress that saving for college has never been more important, she said.
To emphasize the point, the -company will send advisers copies of Admissions, a new magazine addressing college issues, as well as a children's book about the importance of college, “Oh, the Possibilities.”
TIAA-CREF, which manages direct-sold programs in eight states with more than $5 billion in assets, will focus on “basic concepts” for its marketing this fall. It will emphasize dollar cost averaging as a way to invest in 529 plans and of diversifying investments, said Doug Chittenden, president of TIAA-CREF Tuition Financing Inc.
To broaden the plans' appeal, the company is also working with the Atlanta Falcons football team this month to sponsor a sweepstakes in Georgia promoting college savings.
ADVISERS ON BOARD
Financial advisers appear to agree with the industry's decision to emphasize awareness and benefits of 529 plans.
“I haven't seen a change in the attitude of parents regarding saving for college,” said Bob Ardini, a certified financial planner for Key Financial Concepts Inc. of Vernon Conn., which has approximately $75 million in assets under management. “It is more difficult to save for college and retirement, but companies like Fidelity have done a good job in communicating investment options that are available like age-weighted programs.”
“I tell clients that 529 plans are still a very good opportunity that should not be overlooked,” he said.
“I think what the 529 plans are doing is an acceptable approach,” said Eric Linger, principal for Sherwood Investment Services of Redmond, Wash., which has more than $50 million in assets under management. “It should be up to the investment adviser to educate the client. There's enough confusion in the industry already, and for 529s, sticking to basics is the best bet.”
E-mail Charles Paikert at cpaikert@investmentnews.com.
