State’s Chief Investment Officer Responds To CHET Fret

(Opinion.) We chose a new program manager for the state’s college savings program after an in-depth comparison of investment returns, fees, cybersecurity protocols and more. We are also disappointed with the first few days of the transition to Fidelity Investments and expect to see improvements soon.

As Connecticut’s interim chief investment officer, I would like to respond to Robert Schonberger’s recent opinion piece about the Connecticut Higher Education Trust (CHET). Our investment team made the recommendation to Treasurer Shawn T. Wooden to select Fidelity Investments as the new manager for the savings plan, and I want to shed light on why we did so.

Let me start by acknowledging, taking responsibility and apologizing for the frustration that some CHET account holders have experienced during this transition process. To date, we are 25 days into the transition and are disappointed with how Fidelity Investments has prepared for the process and carried out its customer service operations.

Our team is working to address the areas of concerns brought to our attention by CHET account holders. We understand and agree that any disruptions during this transition period are unfair to CHET account holders, who are saving to help their loved ones pay for a higher education. Wooden has made this a top priority. He has made it clear to Fidelity Investments that, thus far, the transition has not met his standards and that he expects immediate improvements based on what he is hearing from CHET account holders.

As both a parent and an investment professional with nearly 40 years of institutional experience, I highly value 529 plans like CHET. Such plans are a way to save for future educational needs on a tax-advantaged basis. Despite the understandable frustration at the moment with the transition to Fidelity Investments, we expect the decision to switch to benefit CHET account holders in the long-term.

In January 2020, our investment team began a rigorous 11-month analysis and evaluation process to find the best 529 provider for Connecticut. This thorough evaluation process focused on a number of critical factors, including investment options and performance, fees comparison, cybersecurity protocols and standards, educational support programs such as Baby Scholars and Advance Scholarship, and more. Of all the applicants — including the prior program manager TIAA-CREF Tuition Financing Inc. — we determined that Fidelity Investments could provide the best long-term investment returns for Connecticut families and maximize CHET account holder’s savings.

On Dec. 7, 2020, Fidelity Investments sent all account holders communications via mail, notifying them that Fidelity Investments would become the new program manager for CHET on Feb. 8, 2021. Wooden made the official announcement the next day.

We see CHET under Fidelity Investments as more customizable to individual time horizons, risk tolerances, and return objectives. Personal preferences about products and investment styles run the full spectrum, from passively managed index funds to actively managed funds that emphasize security and industry selection with an expectation of achieving higher returns than an index. Through CHET’s expanded investment options with Fidelity Investments, account holders can choose either passive or active management, or decide on a blended strategy that utilizes both passive and active funds to generate returns. By having access to these investment choices, participants gain economic empowerment and the potential for higher investment returns to pay for the beneficiary’s educational future. Fidelity Investments provides a broader suite of investment options for CHET account holders and a track record of delivering strong returns.

Wooden aims to ensure that every Connecticut resident has the best tools available to help them save for their loved ones’ future education costs. Coming from a family that couldn’t afford his college tuition, he knows that there are few subjects more important to educational attainment than planning for how to pay the future expenses. Moreover, as the father of two teenage sons and a CHET account holder himself, Wooden recognizes the importance of CHET, as well as the frustration some have experienced with the program management transition.

While we continue to hold Fidelity Investments accountable and address the challenges of this transition, please know that we remain confident that this change will help account holders achieve greater financial savings. Our intention and priority are to meet every account holder’s expectations and help Connecticut families save for their educational future through CHET.

Steven Meier is the interim chief investment officer at the Connecticut Office of the Treasurer. He is certified as a chartered financial analyst, a financial risk manager and a certified financial planner.