Is your 529 plan one of the six that Morningstar just downgraded?

One 529 plan bumped up to gold, joining only two others with that top rating

Oct 25, 2016 @ 1:31 pm

By Liz Skinner

Six college savings plans moved down on Morningstar's annual rankings this year, including West Virginia's adviser-sold plan, which slipped to a negative rating, according to Morningstar's latest report issued on Tuesday. That savings plan has about $1.6 billion in it.

The Chicago-based ratings firm also bumped six section 529 college savings plans up its roster, with only Virginia's direct-sold college savings plan advancing to gold this year. Two other plans currently have a gold rating, the Nevada Vanguard college savings plan and Utah educational savings plan, both direct-sold plans.

“The 529 plan industry as a whole continues to improve,” said Leo Acheson, Morningstar's lead research analyst for 529 plans. “All of the plans that were upgraded cut fees in one way or another, something we've seen across the industry pretty consistently over the years.”

In all, Morningstar ranks 63 plans, representing nearly all of the $240 billion invested in these tax-advantaged college savings vehicles. Other Morningstar “medalists” include 10 plans with a silver ranking and 20 with a bronze.

In addition to the Hartford SMART529 plan in West Virginia, two other plans fall in the negative category, South Dakota's CollegeAccess 529 and Arizona's Ivy Funds InvestEd 529, both adviser-sold plans.

(More: The 5 Ps of picking a 529 college savings plan)

Some plans were downgraded because they didn't cut their fees and ended up looking less competitive compared to the industry as a whole, which did continue to trim costs, Mr. Acheson said.

Other changes include plans in Alaska and Maryland dropping from the highest ranking of gold to silver, and three plans in Arkansas, Georgia and South Carolina moving from bronze to neutral.

2016 Morningstar analyst ratings for 529 college-savings plans
Source: Morningstar

Plans from Arizona, Delaware, Massachusetts, and New Hampshire, advanced this year from neutral to bronze, while the Missouri MOST 529 plan, a direct-sold plan, rose two levels from neutral to silver.

(More: What grade does your state's 529 plan get)

The fact that fees tend to run higher on adviser-sold plans should not disadvantage those plans because Morningstar separates adviser-sold plans and those sold direct to the public when they evaluate the plans, Mr. Acheson said.


What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video


Why some retirement plan advisers think Fidelity is invading their turf

InvestmentNews editor Frederick P. Gabriel Jr. and reporter Greg Iacurci talk about this week's cover story that looks at whether Fidelity Investments is stepping on the toes of retirement plan advisers.

Latest news & opinion

Cetera reportedly exploring $1.5 billion sale

The company confirmed it's talking to investment bankers to 'explore how to best optimize [its] capital structure at lower costs.'

SEC Chairman Jay Clayton outlines goals for a new fiduciary standard

Rule should provide clarity on role of adviser, enhanced investor protection and regulatory coordination.

Advisers bemoan LPL's technology platform change

Those in a private LinkedIn chat room were sounding off about fears the independent broker-dealer will require a move to ClientWorks before it is fully ready.

Speculation mounts on whether others will follow UBS' latest move to prevent brokers from leaving

UBS brokers must sign a 12-month non-solicit agreement if they want their 2017 bonuses.

Maryland jumps into fiduciary fray with legislation requiring brokers to act in best interests of clients

Legislation requires brokers to act in the best interests of clients.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print