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BOSTON, October 9, 2003 -- With approximately 65% of new 529 plan assets having come through advisor-sold plans1, these popular college savings vehicles continue to offer advisors an efficient and effective way to help strengthen their existing offering and increase the growth potential of their overall business.
"With nearly one hundred 529 plans available, advisors are playing an increasingly important role in helping families sort through the choices and select the right plan," said Tracy Lemoine, senior vice president, Fidelity Investments Institutional Services Company. "529 plans represent a tremendous business building opportunity for advisors. Not only can they help strengthen existing client relationships, but they are proving to be an excellent acquisition tool."
529 plans offer a variety of features that can make these college savings vehicles easy to sell and manage for advisors. However, not all 529 plans are created equal. When adding a 529 plan to their offering, advisors should, among many factors, consider:
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The benefits of value-add features.
Some 529 Plans offer additional features or programs that can help make these plans even more attractive. For example, Fidelity Investments 529 College RewardsSM Credit Card2 holders can earn two percent on all eligible retail purchases when deposited in a Fidelity Advisor 529 Plan account. Advisors who are aware of these additional features and programs can enhance their client relationships by helping their clients maximize their college savings and bring families one step closer to meeting the rising costs of a college education.
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The investment management process.
Age-Based investing is a technical and highly sophisticated approach to money management that can be conducted in a variety of ways. It is important that advisors choose a 529 plan with a money manager who has experience in this type of investing. It is essential that the portfolios have the appropriate number of underlying funds that cover a broad range of asset classes and investment disciplines in order to meet the client's needs in any market environment. Advisors should have an understanding about whether the age-based portfolios' allocations are monitored on a continuous basis and modified according to market conditions. Certain plans, such as the Fidelity Advisor 529 Plan, may provide more flexibility than others with respect to the number of options they offer and the Participant's ability to select any Age-Based Portfolio, regardless of the Beneficiary's age. Fidelity also monitors its portfolios on a daily basis using a technique that has been in development for institutional pension plans.
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Additionally, advisors should keep in mind that 529 plans can help them:
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Identify New Business Opportunities.
529 plans can help advisors extend their client relationships to include immediate family members, such as grandparents, who would like to contribute to their grandchild's college education. Conversations about college savings could also help advisors capture a greater share of a client's portfolio, as they uncover additional opportunities such as estate planning.
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Capitalize on Seasonal Opportunities.
Advisors may want to approach clients wishing to give the gift of education for graduations or during the holiday giving season. Advisors can help their clients establish a 529 plan account by contributing on a monthly basis through a periodic investing plan or by making a lump-sum investment3 . This may also lead to other seasonal planning opportunities such as year-end tax planning.
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Fidelity-managed 529 Plans offer residents of any state the opportunity to save federal income tax-free for their children's future college education at most accredited colleges and universities nationwide and at eligible foreign institutions4 . The plans offer professional money management, high contribution limits, no income restrictions and the ability for account owners to maintain control of an account specifically dedicated for college savings.
Fidelity currently manages more than $3.2 billion5 in 529 Plans including the UNIQUE College Investing Plan, the U.Fund College Investing Plan, the Delaware College Investment Plan and the Fidelity Advisor 529 Plan. For more information on 529 Plans, including a list of College Planning seminars, families may visit www.fidelity.com/college, call 1-800-544-1914 or consult their employer or financial advisor.
About Fidelity Investments Institutional Services Company
Fidelity Investments Institutional Services Company provides investment management services through investment professionals at financial institutions nationwide, including wirehouses, regional and independent broker/dealers, banks, trust companies and insurance companies. The company offers Fidelity Advisor Funds®, Variable Insurance Product (VIP) Portfolios, systematic investment plans, institutional money market funds and a comprehensive line of retirement products and services. Fidelity Investments Institutional Services Company's total assets under management were $168.9 billion as of August 31, 2003.
About Fidelity Investments
Fidelity Investments is one of the world's largest providers of financial services, with custodied assets of $1.6 trillion, including managed assets of $906.0 billion as of August 31, 2003. Fidelity offers investment management, retirement planning, brokerage, human resources and benefits outsourcing services to 18 million individuals and institutions as well as through 5,500 financial intermediaries. The firm is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans, one of the largest mutual fund supermarkets and a leading online brokerage firm. For more information about Fidelity Investments, visit www.Fidelity.com.
1Financial Research Corp., as of December 2002.
2 Earn rate may be subject to change. Other restrictions apply. Full details are provided in the Program Guidelines documents. For rate, fee and other cost information, and to learn more about the benefits of the Fidelity Investments 529 College Rewards program, please refer to the online credit card application at www.advisorxpress.com or call 1-866-438-6262. This credit card program is issued and administered by MBNA America Bank, N.A., which is not an affiliate of Fidelity Investments, and does not offer, manage, or guarantee any of the 529 plans managed by Fidelity Investments.
3 Periodic investing plans do not guarantee a profit or protect against a loss in a declining market.
4 Pursuant to the Economic Growth and Tax Relief Reconciliation Act of 2001("EGTRRA"), qualified distributions are federal income tax free. The provisions of EGTRRA will expire on December 31, 2010. Unless the law is extended by Congress and the President, the federal tax treatment of 529 plans will revert to its status prior to January 1, 2002.
5 As of August 31, 2003.
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The UNIQUE College Investing Plan and the Fidelity Advisor 529 Plan are offered by the State of New Hampshire and managed by Fidelity Investments. The U.Fund College Investing Plan and Delaware College Investment Plan are offered by the Massachusetts Educational Financing Authority and the State of Delaware respectively, and managed by Fidelity Investments. If you are not a resident of New Hampshire, Massachusetts, or Delaware, you may want to investigate whether your state offers its residents a Plan with alternate tax advantages.
Fidelity Managed 529 Plan portfolios are managed by Strategic Advisers, Inc., a registered investment advisor and a Fidelity Investments Company.
Units of the Portfolios are municipal securities and may be subject to market volatility and fluctuation.
Brokerage services for direct-sold 529 plans are provided by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
Fidelity Investments Institutional Services Company, Inc.
82 Devonshire Street, Boston, MA 02109.
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