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Tuesday, June 04, 2002

Taking AIM On 529

by: Tony Pennino

It was the AIM Media Event 2002. The firm trotted out many of its bigwigs including Bob Graham, founder, and Mike Cemo, president and ceo of AIM Distributors, to meet the financial press in New York City. Among those in attendance was Bill Raynor, vice president of education savings sales and marketing director at the firm. He spoke with the MutualFundWire.com about AIM's 529 business.

"Business has been good, positive," Raynor contended. "We are starting to see greater recognition among the investing public for 529 plans. When I first started having meetings with investors, maybe three or four in a room of 200 would raise their hand when asked if they knew what a 529 plan was. Now, that number is more like 20 or 25. So, we are making some progress, but we still have a long way to go."

AIM offers its national plan through the State of Nebraska. It also has investment options in the Maine plan and the Alaska plan.

But what's on the horizon for the firm in this arena? "Starting in July, we will be offering a corporate 529 plan. This is something we are making available to employers to offer their employees. It will be completely online, soup to nuts. Employers asked for something that will make it easy for them. Also, given the times, they don't have the staff or resources in HR to allocate to something like this. So, we needed to make this an added benefit, not an added burden," the executive continued.

"Work sponsored 529 plans are not going to be off the charts. Sales in this area will be slow, like they were when 401(k) plans were first starting out," he added.

Raynor sees the firm's (as well as Invesco's) current 401(k) clients as a natural cross-sell for the corporate 529 offering. "But people are always juggling their priorities between saving for college and saving for retirement. We are providing for a need, but we may be second to some people's retirement concerns," the executive stated.

"It is very important for 529 plans not to be confusing. As with anything, when something is confusing, it is easy for people not to act. 529s need to be less complex. That is part of the reason we designed the corporate 529 as we did," Raynor continued.

According to Raynor, the major concern for states right now is the distribution game. "States are looking for distributors with a national presence. That is why both California and Oregon are looking for second managers. They need managers with a national scope."

He sees that a trend toward unbundling -- i.e. states using service x from one firm and service y from another -- as something that will hit the industry eventually but is not here yet. He is also concerned about corporate 529 plans being offered to employers with employees in a number of different states; the executive commented that an employer's obligation to disclose different tax burdens was as yet unclear.

Raynor concluded by saying that AIM was taking a very active interest in its 529 business. "AIM advertising money -- our television spots and our spots in print publications -- is going exclusively into raising awareness about our 529 offerings," he contended. 

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