Back to School: 5 Things You Need to Know About Offering 529 Plans to Your Clients

By Amy McIIwain, President, Financial Social Media on Friday, September 2nd, 2011

Let’s face it: College costs are skyrocketing—and even clients with the healthiest portfolios are finding the cost of financing their children’s education to be substantial. That’s one reason 529 plans have become so popular, and why roughly 80% of advisors now offer them to clients.

So…now that we’ve reached the time of year when students are headed back to school, I’d like to spend a moment taking a closer look at 529 plans and what they can mean for today’s advisor. Here are 5 things you need to know:

1.) 529s are good for business: They strengthen your client relationships.

Why do 80% of advisors sell 529s? One reason is that these advisors recognize the importance of being involved in every aspect of their clients’ lives. College planning and financing is a big deal—and represents not only a sizable financial commitment, but also a fundamental change in the parent/child relationship. By showing you are watching out for your clients’ total financial picture—and being there for them during life’s big events—you have a better chance of retaining them through difficult times.

In fact, over 75% of surveyed clients consider 529 plans extremely important…second only to their own retirement plans! That’s something that you want to be a part of.

2.) All 529s are not created equal: Research the plans you recommend.

As you undoubtedly know, not all 529 plans are alike. You want to recommend the plans that maximize your clients’ returns and meet their particular savings objectives. As with many other types of financial vehicles, there are several things to consider when recommending 529 Plans:

  • Performance. How’s the plan doing?
  • Expenses & Fees. Reasonable?
  • Investment Choices. Are they consistent with your firm’s philosophy?
  • State Tax Benefits. Does your client need guidance here?

3.) 529s can truly highlight your advisory talents: Take advantage of the opportunity.

With 529s, you can adeptly reinforce to your clients why they’re working with you in the first place. In the plainest and simplest terms, they flat out need your help in selecting a 529 plan. After all, you’re the person they turn to for keeping them on track financially—not only for retirement, but for all their financial goals. College planning should absolutely be incorporated into these goals—putting you in the prime advisory position. 

Also, chances are, your client wants and needs active investment management after the market turmoil we’ve just experienced—not only in 2011, but over the past few years. This is no time for investors to be trolling unknown waters by themselves—your clients need you!


And please remember to remind your clients that advisor-sold plans don’t necessarily cost more. Rather than be driven by financial gain, you are making a modestly-priced recommendation that fulfills your duties and responsibilities as an advisor—namely, helping your client select and use the plan that is most beneficial to them. 


4.) 529s are flexible: Educate your clients on how versatile 529s really are.


It’s up to you to let them know just how flexible 529 plans really are. For example, 529 plan assets can be used at any eligible educational institution that meets specific federal accreditation standards. This includes most four-year colleges and universities, many two-year institutions, and a selection of vocational schools. The assets can also be used for advanced degrees. 

Likewise, the assets can be used for expenses as well. This includes tuition, room and board, books, computers, and mandatory school fees.

It’s also important to let your client know that he or she can transfer assets among family members with no tax repercussions. So whether your client transfers funds to siblings, children, nephews, nieces, anyone in the family—it’s all a painless transaction.

And finally, in terms of flexibility, anyone can be an account owner and anyone can be named a beneficiary. The only requirements for being a beneficiary are that the person must be a U.S. citizen and have a social security number.

5.) 529s can be established any time: It’s never too late to start.


Make sure your clients understand it is never too late to start a 529. There are absolutely no age restrictions for a participant. For example, if a beneficiary decides to go back to school later in life—the assets are there for them, ready to finance their continuing education and growth.  

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