The Upromise of Rebate Plans

Think of Upromise and BabyMint as frequent flyer programs for college. Instead of accumulating miles, however, members ring up contributions toward a 529 account every time they buy a particular product or shop at an affiliated retailer. Increasingly, reps are using these loyalty programs as tools to win over new accounts and to strengthen existing ones. It's a touch point, says Joseph Gruber, chief

Think of Upromise and BabyMint as frequent flyer programs for college. Instead of accumulating miles, however, members ring up contributions toward a 529 account every time they buy a particular product or shop at an affiliated retailer. Increasingly, reps are using these loyalty programs as tools to win over new accounts and to strengthen existing ones.

“It's a touch point,” says Joseph “Joby” Gruber, chief executive of SunAmerica FSC Securities and Advantage Capital units, which encourage reps to recommend BabyMint to clients. “They can say, ‘Here's something that I ran across that I've been able to research for you’ — and there's no catch. It's a differentiator.”

Salomon Smith Barney spokesman Edward Giltenan agrees: “We're seeing tremendous interest among our financial consultants and their clients for the Upromise program.”

These programs also mean big business for managers. Financial Research Corp. said in a recent study that merchant and credit card rebates have the potential to represent $1.1 billion a year in assets to investment management firms.

Savings accumulated through BabyMint, which is offered by more than 22,000 financial advisors, can be used for any 529 plan. Upromise, which is run by Upromise Investments, a registered broker/dealer, offers its more than 1 million members 529 accounts managed by either Smith Barney or Fidelity, or will send a check to be used in any plan. Both offer credit cards that provide even greater rebates, too.

Registration is free for Upromise and BabyMint, which take small cuts of the rewards as payment for facilitating the service. A third program, EdExpress, deducts a $19.95 fee from member's rebates each year. Once your clients register, they can accumulate change every time they shop at an affiliated retailer or buy a certain product. Upromise, for example, offers rebates from companies including AT&T, Toys “R” Us, ExxonMobil and McDonald's and on products such as Tylenol and Coca-Cola.

“Delivering our ‘Save For College’ message across nearly every grocery aisle could help millions of families take charge of this ‘stay awake’ issue,” Steve Hyer, president and COO of Coca-Cola Ventures, recently said.

Upromise says manufacturers contribute 3 percent to 5 percent of the purchase price to shoppers with an account. BabyMint rebates vary from 1 percent to as much as 20 percent on special promotions, and even more when its branded credit card is used. Kellogg, for example, recently offered a $1.25 reimbursement on Rice Krispies through BabyMint.

Grandparents or other relatives can also use these programs, designating their refunds for a younger beneficiary.

The downside, aside from extra paperwork, is that your clients may wind up keeping separate accounts for the same goal.

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