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Decimated Ad Budgets Focus on 529 Push


Advertising budgets have been slashed throughout the fund industry, yet several firms are spending what little is left in their ad budgets to promote 529s, focusing their ad dollars in that area.

Raising the general public's awareness of the products is critical. More than 80% of retail investors have never heard of 529 college savings plans, according to a survey conducted by Schoolhouse Capital, State Street Corp.'s education savings subsidiary.

"It's a nascent market," said Marilyn Miller, senior VP and director of marketing for AIM Distributors. "There's been a lot of media coverage [of 529s], but not a lot of advertising. I expect we'll see more of that now."

AIM is using the entirety of its $4 million 2002 advertising budget to promote its 529 plan. The ads are also designed to promote AIM brand awareness in general, but their product focus is the college savings plan, Miller said. Recent print ads have appeared in The Wall Street Journal, Barron's and Financial Planning magazine. So far this year, 86 television commercials have run on a variety of network television and cable stations, and the firm has purchased time for another 171 spots beginning today, nearly all of which will run by the end of April. The campaign is meant to lure both retail investors and financial intermediaries, Miller said.

"I think that whenever new products are introduced into the marketplace one of the essential ingredients to a marketing and sales plan is advertising," said Matthew Schiffman, VP of ManuLife College Savings. "Because we market through financial intermediaries and advice givers, ManuLife decided that it was critical that we incorporate advertising in trade [publications]."

So far, those trade magazines have included Financial Planning, On Wall Street and Investment News. The ads have translated into increased phone calls, and the firm is planning to continue the campaign, Schiffman said.

"I think that the competition for mind space and shelf space at the intermediary level is going to ignite and because of that we will continue to advertise," he said.

Footing the Advertising Bill

Nearly all of the 529 contracts that program managers sign with sponsor states include a provision stating that the managers need to spend a certain amount each year on in-state advertising, said Chris Stack, a managing consultant for Saving For College Service, an affiliate of SavingForCollege.Com. While a few do include provisions for national advertising, most of the national ads are done optionally by the program manager in an effort to promote plans, Stack said. Even if states do not require that national advertising be included in a contract, some firms will include it in their proposal in order to win the mandate, said Sandra Forcier, director of marketing for Schoolhouse Capital.

When the State of Alaska sought a 529 manager for its direct-sold plan, it wanted a certain amount of advertising built into the contract, and T. Rowe Price, which won the mandate, agreed to that, Schiffman said. However, for Alaska's adviser-sold plan, which is run by ManuLife, there was no contractual obligation to advertise. Still, all of the parties involved had an understanding that 529 advertising was in ManuLife's marketing plan, Schiffman said.

Free Exposure

One of the advantages for an investment manager to be a partner on a 529 plan, as opposed to its program manager, is that partner firms are not responsible for the advertising efforts, said Forcier. The firm that holds a state 529 contract may generate more in fees from their arrangements with partnering firms, but they also typically have to pay for the marketing and advertising. For example, ManuLife wanted to highlight the fact that its plan is multi-managed, so its ads include a listing of its partner firms-AIM, Davis Advisors, Franklin Templeton Investments, MFS Investment Management, OppenheimerFunds, PIMCO and T. Rowe Price. American Skandia, which has also recently launched a 529 ad campaign emphasized the "Nine World-Class Money Managers" partnered with its plan including PIMCO, Neuberger Berman, Gabelli Asset Management, PBHG Funds, Strong Capital Management, Federated, Wells Fargo, Marsico Capital Management and INVESCO.

Bowled Over

Schoolhouse has benefited from its partnership with New York Life Investment Management on its adviser-sold plan in New Mexico. On that plan, NY Life is responsible for the marketing efforts, and, in January, the firm sponsored the Mainstay Independence Bowl (it operates the Mainstay Funds). During the game, NY Life highlighted the college savings plan.

For New Mexico's other, direct-sold plan, Schoolhouse is responsible for the advertising. The firm has targeted two market segments, parents and grandparents, Forcier said. The firm has placed ads in a variety of newspapers and parenting magazines, bought radio airtime and sponsored a variety of regional events to attract investors. One thing the firm has had to be careful of is not to advertise in competition with its other plan, which is being pushed to financial intermediaries, Forcier said.

"I think for 529s, the market is so broad and so open that you're going to see advertising all over and not just in the traditional places," Forcier said.

For example, Fidelity Investments, which would not comment on any aspect of its advertising, is currently advertising 529 plans on SavingForCollege.Com, in addition to its television commercials.