Upromise Inc., a leading college savings company, has introduced a new chief executive officer as it tries to expand its profile as a 529 plan distributor, according to its chairman.
Thomas Anderson, who was chief executive officer of Capital One's AmeriFee unit, has been hired to succeed George Bell, who will remain on the board of directors, Upromise said Tuesday.
The hiring was the latest in a series of executive changes at Upromise. In December, its broker-dealer arm, Upromise Investments, announced the hiring of Jeff Howkins to be chief operating officer and promoted Venkat Gaddipati to chief technology officer and Peter Angus to vice president of client services.
Michael Bronner, the founder and chairman of Upromise, said it decided the time had come for an image overhaul through change at the top.
"I think George recognized and we recognized that we needed someone with more financial services experience for Upromise to continue to evolve from a free loyalty service to a player in the 529 space," Mr. Bronner said.
The Needham, Mass., company, which made its mark by arranging rebates on consumer purchases from companies like America Online, AT&T, Citigroup, General Motors, and McDonald's to put into college savings accounts, has since become a 529 plan administrator.
In July 2003, Upromise joined Vanguard Group and the former FleetBoston Financial Corp.'s Columbia mutual fund group to succeed TIAA-CREF as New York's 529 program manager. Mr. Bronner said Upromise manages $6 billion of assets through 529 programs in New York, Colorado, Iowa, and Nevada.
The company hopes to expand its presence into other states, he said.
"We have very good 529 experience in terms of setting up these plans and administrating them, but in terms of integration of our 529 program and our loyalty program there is a need for more expertise," Mr. Bronner said. "This was recognized by George, and we knew the time was right."
Mr. Anderson, whose first job was as a teacher in Boston public schools and with Massachusetts Special Education Reform, promises to bring a multifaceted approach to his new job. Before becoming chief executive officer of AmeriFee, a medical finance business, he ran the Young Adult credit card line at Capital One. Previously, he was a partner in McKinsey & Co., where he focused on financial institutions, retail banking, and consumer credit.
Mr. Bronner said Mr. Anderson brings retail finance and card experience to Upromise.
"We needed a retail focus to help us maximize the penetration of products we are building and the integration of those products," Mr. Bronner said. "Tom's going to play an important role in that."
Mr. Bronner said he believes a significant opportunity exists to develop market share. Analysts and executives agree that the college savings business is in the midst of a shakeout. Many midsize players are leaving the business, and this is creating opportunities for companies like Upromise.
"A lot of people rushed in with the premise that the assets were going to be huge and there was just an unlimited ability to make some money here," Bruce Harrington, a vice president and the director of product development and marketing at MFS Investment Management in Boston, has said. "Everyone needs to realize that a lot of work has to go in before money can be made."
In December, State Street Corp. announced that it had agreed to assign its New Mexico 529 college savings program management business - conducted by its Schoolhouse Capital unit - to two of its distribution partners, Wachovia Corp.'s Evergreen Funds and OppenheimerFunds, which is majority-owned by Massachusetts Mutual Life Insurance Co. The management changeover was scheduled for Jan. 31.
Mr. Harrington said other 529 providers would probably leave the business during 2005 as companies struggle for scale. At Sept. 30 each of the top 40 college savings plans had at least $86 million of assets, he said, but the 50th-largest had only $16 million.
"You can't make money at this business with only $16 million in assets," he said last month. "What is happening is, bigger plans are getting bigger, and the bottom 10 or 15 plans are finding it very, very tough."
Mr. Bronner said he believes there will be opportunities for Upromise to expand as other plan administrators leave the business or as state contracts with 529 plan providers expire in the next several years.
"We are still more known as a loyalty service, and we want to balance that more over time," Mr. Bronner said.
Since its start-up in 2001, Upromise has become the largest nongovernmental service helping families save for college; it has six million members nationwide. In two years, working with Vanguard Group, Upromise also has become the country's largest provider of direct-to-consumer 529 college savings plans.
