Section 529 Plans

1
Section 529 Plans

• Market Size Industry Developments

2
Projected Growth (Source FRC)
3
Industry Leaders (Source FRC survey)

• TIAA-CREF 2.46B American Funds 1.01M
• Alliance 2.25B SSB 856M
• Fidelity (comb.) 1.95B T. Rowe
  558M
• Putnam 1.73B Strong 520M
  (est.)
• Merrill Lynch 1.20B Vanguard
  266M
• Top 10 program managers have an estimated 86
  market share
• FRC survey captured approximately 95 of the
  industry, which is estimated at 14.85B as/of
  2Q02
• Despite relatively poor underlying investment
  performance during 2Q02, total 529 savings plan
  assets grew by 16
• includes Manulife assets
• IA only adding UT assets (state, as program
  manager, uses Vanguard funds) totals 484M

4
Assets of largest state plans

•   

5
Assets by Distribution Method

• As/of 2Q02 - Intermediary-sold 8.57B
  Direct-sold 5.42B
• RIA assets may fall under either
  classification, mostly in direct number
• Assets in broker-sold channels have increased
  from 54.2 since 4Q01
• Intermediary channel sales are generally 65
  brokers, 35 banks

6
Average Account Size

• Over 2 million 529 savings accounts have been
  opened (as opposed to approximately 1.2 million
  prepaid accounts) . The average Section 529
  savings account holds 5,517 in assets, range is
  from low of 2,011 to high of 11,761
• ME (Merrill) - 11,761 NH (Fidelity Adv.) -
  7,360
• UT (state/Vanguard) - 9,277 KS (American
  Century) - 7,125
• MA (Fidelity) - 8,783 OH (Putnam) - 5,581
• WY (Mercury) - 8,130 NY (TIAA-CREF) - 4,598
• ND (Morgan Stanley) - 8,098 GA (TIAA-CREF) -
  2,011
• Direct-sold plans appear to have
  less-than-average assets per account while
  accounts established through brokers tend to
  exceed the average
• Ongoing public policy concerns (opening as many
  accounts as possible across all income
  demographics) will tend to place downward
  pressure on the average
• Recent tax law changes and increased investor
  awareness may boost average

Selected Others
Top Five
7
Recent developments affecting 529 industry

• Multi-manager programs
• Product differentiation, increased distribution
• How broad could it go?
• Individual fund offerings/Alternative asset
  portfolios
• Intermediary-plan driven traditional funds,
  stable value, real estate, SRI
• Standalone funds in direct-sold programs
  fiduciary risk?
• Multi-program states
• Driven by demand for access, desire for increased
  distribution
• AK, AZ, NE, OR, NH, NM, NV, RI, WI, among others
• Workplace distribution
• Low enrollment rates and asset gathering signal
  lack of investor education
• Large corporation need for multiple providers
• Proposed or enacted state legislation with
  dissimilar intent
• IL enacts legislation penalizing residents using
  out-of-state plans
• MD governor vetoes bill extending deduction to
  residents using out-of-state plans