Private college plan looks to educate advisers

The Private College 529 Plan -- which helps individuals save money to pay for tuition at 270 private colleges -- is reaching out to financial advisers to convince them of the merits of the program. The plan, which used to be called the Independent 529 Plan, allows people to buy certificates that can be cashed in for tuition at the schools, locking in today's tuition rates. The pre-paid tuition plan is the only one in the country that is sponsored by private schools, said Nancy Farmer, president of the Private College 529 Plan. It's been around for eight years, though a year ago it replaced program manager TIAA-CREF with OppenheimerFunds Inc., in part, because the plan's managers felt that the firm could do a better job letting financial advisers know about the plan. The private college scheme has about $200 million in assets and 8,000 account holders, compared to the more popular state-sponsored 529 plans that have roughly $157 billion in assets. Advisers have largely been credited with helping grow assets in the traditional 529 plans, both in adviser-sold plans and direct-sold plans. Increasingly, financial advisers are steering clients into those programs even though they receive no commission for it. The Private College 529 Plan is talking up its benefits at the Financial Planning Association annual conference in San Diego, marking the first time the plan has tried to aggressively target advisers. It's especially wooing registered investment advisers, who can't be put off by the fact that the plan does not pay commissions. "It's a good deal for clients," Ms. Farmer said. "This plan gives them a broad range of choices and helps alleviate some risk." The plan can be particularly useful when combined with traditional 529 plans, which allow investors to save for college through different investments, said Richard Walsh, vice president of OppenheimerFunds. With those plans, asset values fluctuate according to investment performance, which can worry parents anxious about paying for increasingly high college costs. "With a hybrid approach, part of your money is exposed to market risk through a standard 529 and the other half is like an insurance policy where you're locking in a guarantee on the tuition portion," Mr. Walsh said. "Advisers can say to the client, 'Let's lock this up like an insurance policy and really focus on the room and board portion with a market-exposed account that we can talk about together." The pre-paid program pays for a portion of a year at the participating private schools, which include, among others, Ithaca College, Boston University, Wesleyan and Drexel University. The plan is always talking to additional schools, Mr. Walsh said. The average cost of college tuition at private schools is about $36,000 a year, though some – such as the schools mentioned above -- are more expensive.