The evolution of 529 plans continues as firms strong in distribution win against pure asset management shops. The latest confirmation comes in the selection of American Funds as the asset manager for Virginia's third 529 program called CollegeAmerica.

The state already offers two programs, a savings program and a prepaid tuition program. The savings program uses Vanguard, Rothschild Asset Management, Franklin Templeton, Western Asset Management and PRIMCO as asset managers. So why add another?

The key seems to be distribution in what is rapidly evolving into a fiercely competitive national market. American Funds brings with it a national sales force of financial advisors to explain the program to clients. For American Funds, Virginia offers a way into the game before all the pieces on the board are taken.

The new plan is set to rollout nationally beginning in February 2002. It will offer six American Funds: The Investment Company of America, The Growth Fund of America, EuroPacific Growth Fund, American Balanced Fund, The Bond Fund of America and The Cash Management Trust of America. The program will add additional funds from American Funds in the future, said Diana F. Cantor, executive director.

Savers will also be able to choose asset allocation funds that automatically move assets between funds as college approaches.  

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