Quantcast
The MFWire
Manage Email Alerts | Sponsorships | About MFWire | Who We Are

Subscribe to MFWire.com's News Alerts [click]

Rating:529 Does Not Equal 401k Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, February 27, 2002

TRENDS
529 Does Not Equal 401k

by: Sean Hanna, Editor in Chief

Many fund firms are betting that 529 college savings plans are the next 401(k) market. Still, after two years these plans have taken in less than $5 billion to date even by the most optimistic estimates. That makes the puts them where 401(k) plans were in 1983 or so. In other words, it is still early in the game.

Like the pioneers of 401(k), the early providers of 529 plans are also learning from their mistakes. Many of the first generation 529 products relied on low cost products and direct distribution. That failed. Now states and fund firms are quickly adding in intermediary distribution.

A new study from Spectrem shows why these intermediaries are needed. Spectrem's Scott Slater says the study found that "consumers are generally unaware of 529 plans and often confused by the many decision variables, which presents a tremendous opportunity for financial planners and advisors to assist their clients."

Despite the consumer confusion, Slater predicts that there are "tremendous opportunities" for asset managers, administrators, distributors and advisors in 529 plans. The conclusion may not be a surprise, though, since the Spectrem report is specifically geared to helping financial services providers identify opportunities in the 529 market.

Spectrem predicts that distributors of 529 plans will benefit from the changes in the tax code that took effect at the start of the year. Proponents also point to the doubling of assets in plans during the final quarter of 2001. Remember, this growth is off a miniscule base.

Just because the consultants are pushing the next big thing does not mean the asset wave will ever reach shore. Unlike 401(k) plans, which fill a need for every American (retirement), not every American has a child, much less one of who is of pre-college age. Add to that the fact that only half of Americans graduate from college and it is possible to see that fund firms may be disappointed in this market.

401(k) plans also benefit from the employer-endorsement of programs, government-mandated education efforts and discrimination rules that make plan sponsors entice workers into plans. 529 plans have none of these features to drive growth.

For those vendors that succeed in gathering assets through advisors these plans may be a nice niche. They are not a place to bet the farm though, at least not yet. Remember, Fidelity was not in the first wave of 401(k) providers. It did not market its first product until 1987 and did not take the lead in the industry until the early nineties, some ten years into the game.

Sometimes it pays to be second and learn from others mistakes.  

See the list of all the 2002 Most Influential People



Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE

0.0
 Do You Recommend This Story?



GO TO: MFWire
Return to Top
 News Archives
2024: Q4Q3Q2Q1
2023: Q4Q3Q2Q1
2022: Q4Q3Q2Q1
2021: Q4Q3Q2Q1
2020: Q4Q3Q2Q1
2019: Q4Q3Q2Q1
2018: Q4Q3Q2Q1
2017: Q4Q3Q2Q1
2016: Q4Q3Q2Q1
2015: Q4Q3Q2Q1
2014: Q4Q3Q2Q1
2013: Q4Q3Q2Q1
2012: Q4Q3Q2Q1
2011: Q4Q3Q2Q1
2010: Q4Q3Q2Q1
2009: Q4Q3Q2Q1
2008: Q4Q3Q2Q1
2007: Q4Q3Q2Q1
2006: Q4Q3Q2Q1
2005: Q4Q3Q2Q1
2004: Q4Q3Q2Q1
2003: Q4Q3Q2Q1
2002: Q4Q3Q2Q1
 Subscribe via RSS:
Raw XML
Add to My Yahoo!
follow us in feedly




©All rights reserved to InvestmentWires, Inc. 1997-2024
14 Wall Street | 20th Floor | New York, NY 10005 | P: 212-331-8968 | F: 212-331-8998
Privacy Policy :: Terms of Use