After a year of record growth, Hartford Financial Services wants to expand its 529 college savings business over the next two years by increasing sales and, perhaps, in what would be a shift in strategy, by becoming a plan sponsor in another state.
Last year, the Simsbury, Conn., company increased its 529 college savings plan sales a record 29.5%, to $250 million, and its 529 plan assets under management 21%, to $1.1 billion. Now it says it will start examining requests for proposals to determine if it wants to become a provider for states other than West Virginia, whose plan it has sponsored since 2002.
"We are actively considering what acquiring another state may mean for us," said Jeff Coghan, Hartford's director of 529 plans. A 10-year contract renewal Hartford signed in October with West Virginia allowed the company to lower fees, simplify choices and enhance customer service. It also gave Hartford permission to become a provider in other states.
"This really just gives us the freedom to look," Coghan said. "We are not looking at anything specific. We still view West Virginia as our flagship, but if there are opportunities to grow, we will look at different RFPs, and we are open to that." Upromise, Vanguard, Fidelity Investments and a number of other leading mutual fund companies and educationally oriented discount partners have contracts with multiple states to facilitate direct sales to investors. While just one year ago, Coghan had said that Hartford had no plans to go "the multistate route," that model has obviously changed.
Joe Hurley, founder of Savingforcollege.com, a Pittsford, N.Y., website now run by Bankrate Inc., noted, for example, that OppenheimerFunds Inc., which already ran programs in New Mexico and Oregon, added Illinois and Texas programs in the past year. "There certainly is room for Hartford to go after more states," Hurley said.
"Hartford, like Oppenheimer, has strong intermediary distribution and can certainly grow by adding another state." Coghan noted, however, that only 15% of Hartford's 529 assets are from West Virginia residents.
Meanwhile, scores of 529 contracts are due to come up for renewal or rebid in the next two years in a number of states. The immediate benefit of adding another state's plan is the company would assume all the assets currently in that plan.
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