Fund companies hoping to secure a piece of the 529 college savings plan business face a scarcity of opportunities. There are, after all, only 50 spots to go around, and 48 are taken.

Now they are facing competition in New Jersey from two leading banks, FleetBoston Financial Corp. of Boston and Wachovia Corp. of Charlotte, N.C.

By the end of the month, New Jersey, which has self-administered its 529 plan since 1998, will select a 529 administrator. FleetBoston and Wachovia are two leading contenders.

A full roster of companies bidding on the process was not available but Amy Franco, a spokeswoman for New Jersey's Higher Education Student Assistance Authority, said the state is considering a national group of candidates to run the plan. Franklin Templeton of San Mateo, Calif., also submitted a proposal, according to industry sources. A spokesman for Franklin Templeton declined to confirm or deny the company's bid at press time.

State Street Corp. of Boston was custodian of New Jersey's $100 million 529 plan, NJBest, through May, when its contract expired. It was unclear whether State Street, which already runs New Mexico's plan through its Schoolhouse Capital unit, was also one of the bidders. A spokesman for State Street declined to comment.

As was the case recently when Pennsylvania put its program up for bids, a local presence is a factor. Banking companies with a presence in New Jersey are being considered, Franco said.

Both Fleet and Wachovia have major presences in the state through banking companies they acquired or that were acquired by predecessor companies.

Fleet acquired a presence in New Jersey when it bought Summit Bancorp in 1999. The old First Union Corp., which bought Wachovia last year and took its name, has had a presence in New Jersey since it bought the former First Fidelity Bancorp. in 1996.

Charles Salmans, a spokesman for Fleet, said, "A 529 plan is a strategic priority for Fleet, and we are aware of the New Jersey opportunity."

Chad Peterson, a spokesman for Wachovia's Evergreen Investments, said, "People are excited about the potential that 529 plans hold. Clearly, there are a lot of ways to approach this market."

Evergreen has formed a partnership with Schoolhouse Capital, Prudential Financial of Newark, N.J., and SunAmerica of Los Angeles to create a multi-manager 529 college savings plan, The Arrive Education Savings Plan, by the end of the summer. Evergreen plans to sell the product through Wachovia Securities and large regional brokerage firms nationally.

New Jersey is not the only state up for grabs. Louisiana issued a request for proposals in June for its $115 million-asset 529 plan, Student Tuition Assistance and Revenue Trust Program. The state, which had run the plan itself since it was begun in 1997, is looking for a company to manage its equity options, as well as market the plan.

The relatively small asset totals accumulated in the New Jersey and Louisiana plans may explain those states' desire to hire financial companies as administrators. The top 10 state plans range in assets from Virginia's $269 million to Rhode Island's $2.07 billion. Rhode Island's plan is especially attractive because it places the highest limit on how much a saver can deposit.

Joseph Hurley, chief executive officer of of Pittsford, N.Y., a Web site that offers advice and information about college savings plans, said that banking companies such as Wachovia and Fleet are working against established players to find their way into a very competitive college savings market. Mutual fund companies might be in a better position to service 529 plans than banks, Hurley said.

"If banks want to be a leader in this area, they have to choose whether they want to be product manufacturers or product distributors," Hurley said. "There are limited opportunities to be plan sponsors, and financial institutions will work hard to get these positions."

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