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Firms Increase Marketing for New Tax Plan


Last summer, just after Congress approved President Bush's tax plan, most investors knew they had a small rebate check from the IRS coming in the mail. But they didn't know the following: They could now withdraw money tax-free from their 529 programs; they could likely increase contributions to their retirement programs and IRAs; and those 50 and older could probably put more money into their retirement accounts.

Fidelity Investments released a survey on the subject earlier this month demonstrating that investors are largely unaware of how Bush's tax plan affects their investments.

Now, more than six months after the proposal was approved, fund companies are bent on making sure those investors figure it out--and figure it out quickly.

Fidelity, Vanguard, Principal Financial and New York Life Benefit Services, to name just a few, are all increasingly marketing the tax law's benefits to their investors via direct mailings, Web sites, educational brochures and seminars. Some are also teaching financial advisers and broker-dealers about the tax law so that those intermediaries can educate investors.

"All of the companies are spending time and dollars educating their advisers," said Jeffrey Rattiner, a Colorado-based financial adviser and CPA. "There hasn't been a company that I've spoken with that isn't."

The reason is simple: Unlike marketing campaigns that boast investment performance, which can be fleeting, or customer service, which is relatively abstract, fund companies say the six-month-old tax law sells itself. The Economic Growth and Tax Relief Reconciliation Act, as Bush's tax plan is known, simply makes certain investment vehicles more alluring to clients. And that, in turn, will likely result in more assets flowing into fund complexes.

Rattiner said the impending tax season also contributes to the marketing push. As he meets with clients to resolve tax issues, the increased contribution limits come up repeatedly, he said.

In a nutshell, the new law increases maximum annual contributions to retirement accounts from $10,500 to $11,000 this year. Contribution limits will increase incrementally year by year after that. Older workers can contribute more to their plans than other savers so that they can catch up on their investing if they haven't contributed as much in the past. There are also increased pension benefits, increased contributions to IRAs and new tax advantages for 529 plans.

"It's enormous," said Sarah Friedell, a Fidelity spokeswoman. "It impacts so many of our customers."

Crank Up the Marketing Machine

Fidelity has been marketing the tax law's benefits across four of its business units since June. Most recently, it hosted a Web cast about the plan for retirement plan sponsors in October. And the firm plans to conduct seminars about the tax law at its branch locations nationwide next month.

The company has also posted information about the law on nearly a half dozen Web sites. It has included brochures in mailings, featured articles in two magazines that it publishes and filmed a short video that included a discussion about 529 programs with its VP of college planning, Eric Nottonson.

More marketing projects are in the works, Friedell said, although she wouldn't disclose exactly what they would be.

Safeco Funds, a much smaller firm that offers eight products, took a more limited approach. The company included an article about the tax law changes on the cover of its newsletter, which is distributed to shareholders, a spokeswoman said. The firm is also updating its IRA booklet, which is intended to both promote Safeco's products and educate investors about the new law.

Vanguard sent a colorful, glossy mailer to its investors highlighting the increased IRA contributions and the law's "catch-up" provisions for those 50 and older. "Make the new tax law work for you at Vanguard," the brochure says.

At Principal Financial, one of the industry's largest retirement plan providers, executives have updated the firm's Web site to include educational materials about the tax law. And the firm has been educating its representatives in the field.

Principal had "lobbied heavily" in Washington for the tax plan's approval, a spokeswoman said. "The minute it passed, we had a lot of education underway."

New York Life Benefit Services, meanwhile, has been sending a team of more than a dozen marketers into the workplaces of its 300 plan sponsors since last summer. The effort has been aimed at educating individual workers about the increased contribution limits and other benefits, said Thomas Clough, the firm's president. He said his marketing team talked to thousands of workers, although he wasn't sure exactly how many.

As a result, he said a little more than half of the plan sponsors adopted catch-up provisions in the retirement savings programs that they offer their workers.

The educational initiatives involving the tax law will now "become part of the ongoing communication program that we offer to plan sponsors," Clough said.

"At the end of the day, I don't think people care that the law changed," he said. "I think the bottom line is they just want to know what they can do in the plan and what it means to them. It's a great reason to get back in front of people and talk to them."