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Fund Websites Deficient on 529 Information

Now that the Pension Protection Act extends 529 college savings plan features that were set to expire after 2010-the most important being tax-free withdrawals-assets in 529 plans could surge even faster than the 30% clip at which they have been growing over the past two years. Last year, assets in 529s rose 30.8% to $68.4 billion, and this year, they've risen another 31.5% to $90 billion, according to data from Financial Research Corp. and the College Savings Plan Network.

But despite the potential for rapid 529 growth, some fund companies are not adequately equipping their websites with enough proprietary marketing and educational information on 529s, instead using links to whisk visitors to state and college websites, according to Corporate Insight.

"Although these sites tend to provide an abundance of information about their offerings, investors seeking guidance and service from their trusted [investment] firm can be thrown off when being redirected to an unrecognized site with unfamiliar branding," Corporate Insight wrote in a recent report, "Online 529 Plan Content."

The New York-based marketing research and consulting firm examined the websites of 18 large fund companies-including Fidelity Investments, Vanguard, Putnam Investments and American Funds-and tracked how accessible their 529 information was to find.

First, Corporate Insight traced how easy it was to unearth information on products and pricing. Then, it examined the quality of educational material, the availability of calculators and tools, as well as general state information, explained Joe Gittens, an analyst with Corporate Insight who co-authored the report with senior analyst Chris McNeil.

Information on 529s is critical, as financial planners and analysts have repeatedly said that the biggest barrier to their growth is their complexity.

"We expected more depth than what was available on the websites," Gittens said.

Surprisingly, of the 18 fund companies, five did not offer any 529 plan advice whatsoever. "It is important for firms to provide customers with both educational and planning resources to attract new investors to the site and aid customers with these important investment decisions," according to the report.

Of the 13 firms that do have information on 529s, what they offer is general and strikingly similar. This includes price and performance information, education savings comparison charts and aged-based portfolios. "Firms deficient in one area usually atoned by providing above-average capabilities in another," the report said. A few firms had a good balance of education on their site and links to third-party sites.

Only five out of these 13 companies provide direct access to the price and performance information of their 529 portfolios in the dedicated college savings plan section of their website. This could be inconvenient for investors trying to research the portfolios before deciding to invest, as they have to navigate to a different part of the site, Gittens said.

On the other hand, firms provided investors with adequate information on minimum and maximum account contribution amounts and automatic investment options, the report found.

Generally, investors are self-reliant and want to be able to find immediate, thorough information on 529s on the Internet, Gittens said. Companies that expect to win this business "don't want to deprive clients of the information," McNeil added.

Being navigated to a different website confuses investors, McNeil explained. "Investors may not feel as comfortable because they are used to working with a specific company," he said. There has to be some sort of brand recognition when navigating. Additionally, some third-party sites don't offer enough education on 529s, he added.

Fund companies could revamp the 529 sections of their websites with comprehensive, proprietary information that includes multimedia presentations and interactive tools, Gittens suggested. Also, companies can use their websites to appeal to grandparents and other family members besides parents to start 529s for children.

But not everybody agrees that fund companies need to offer comprehensive information on 529s because, they argue, investors are turning to financial advisers and state websites first, for objective information.

"Most investors are not going straight to fund company's websites for information on 529s, but are using them on a secondary basis," said Brian Boswell, a research analyst with Financial Research Corp. of Boston. Fund companies do not want to overload investors with information and confuse them, he added.

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