Direct-sold 529 college savings plans grew faster than adviser-sold plans in 2015

Morningstar reports 529 assets increased 4.3% overall last year, but the direct-sold variety gained market share, to 53.3%

May 27, 2016 @ 10:28 am

By Rob Kozlowski

College savings plan assets grew 4.3% to $227.3 billion as of Dec. 31 from a year earlier, according to a report from Morningstar.

Net flows produced all of the asset growth of the 84 U.S. 529 college plans from the previous year's total of $217.8 billion.

Direct-sold plans as of year-end had a 53.3% market share after growing faster than adviser-sold plans in 2015, up from 51.7% the previous year. Direct-sold plans' growth rate for the year was 7.5%, compared to adviser-sold plans' growth rate of 1%.

Increasing investor demand for the less-expensive direct-sold plans contributed to a decrease in fees to an asset-weighted average of 0.75% in 2015, from 0.79% in 2014. The typical direct-sold plan participant pays 20 basis points in addition to the cost of the underlying funds, compared to adviser-sold plan participants who typically pay 70 basis points.

Virginia's CollegeAmerica plan is still the largest 529 plan by a wide margin, with $51.8 billion in assets, a full 22.8% of the total market, as of Dec. 31. New York's 529 College Savings Program Direct Plan is second with $21.1 billion, or 9.3% of the market.

Rob Kozlowski is a reporter for sister publication Pensions & Investments.


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