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Rating:Fidelity's CA Deal Highlights Current 529 Market Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, April 17, 2006

Fidelity's CA Deal Highlights Current 529 Market

News summary by MFWire's editors

Fidelity has provisionally been selected as 529 plan provider for the state of California, after a review process that also looked at proposals from Vanguard and TIAA-CREF.

According to the Wall Street Journal, these three major players were the only ones to bid for the contract. Fidelity managed to steal the job away from current provider TIAA-CREF by promising low fees, a greater selection of investment options, and enhanced marketing.

Though its 529 assets -- at approximately $1.9 billion -- total less than half of those in New York's plan, California has by far the largest population of any state and good potential for asset growth. That only Fidelity, Vanguard and TIAA-CREF sought the business implies they may be the only administrators still in the market for new 529 business. If so, California's provider search confirms that other companies have abandoned their short-lived efforts to leverage 401(k) capabilities by offering 529 accounts .

However, if Fidelity commits to the 529 market, fund firms will see another opportunity in the form of potential partnerships. Without the California deal, the Boston giant had over $8 billion in 529 assets across four state programs, while TIAA-CREF administrates the programs of 11 states and Vanguard looks after operations for 15. With substantial and active broker-dealer operations, Fidelity could open up a new range of opportunities for non-proprietary funds if it becomes more competitive in the field.  

Edited by: Marie Glancy


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