Pershing LLC is making it easier for its advisers to open college savings plans for clients, starting with the nation's largest Section 529 plan.
This month, advisers will be able to use the Pershing platform to open accounts for clients in the CollegeAmerica plan sponsored by Virginia and administered by American Funds. That plan has $30 billion in assets. In addition, advisers will be able to include those assets in a client's portfolio along with his or her other accounts, said Rich Calvario, Pershing's vice president for product development.
Advisers have been asking for such omnibus accounting abilities, and many are expected to use the capability, he said. Although he wouldn't cite figures, he said it was expensive for Pershing to make the plan available and took most of a year to roll it out.
“One of the biggest challenges for advisers is the effort involved in selling a 529 plan,” Mr. Calvario said. “We expect the steps we're taking to make it easier for advisers to do the business will have an impact on the amount of business they do.”
Pershing expects to give advisers access to two additional 529 plans through its omnibus system by the end of the year, he said. Advisers won't pay for this benefit and there won't be any charges to customers or the investor, Mr. Calvario said.
A CLEARER PICTURE
Dave Hanson, branch manager of the Benjamin F. Edwards & Co. office in Wheaton, Ill., is one of the advisers who told Pershing it would help if he could open 529 plan accounts through its system.
“If money flows through Pershing, we'll see a clearer picture of where it's going and when it's invested,” Mr. Hanson said.
Having the clients' 529 accounts included with their other investments also helps advisers show they are following the
Financial Industry Regulatory Authority Inc.'s “know your client” rule, he said. “Finra doesn't like having outside accounts,” Mr. Hanson said.
Last year,
Edward Jones made the CollegeAmerica plan available to its brokers through an omnibus system, and the firm's education specialist, Lauren Monks, said it's been a success.
“We've seen significant impact on sales in
American Funds accounts,” Ms. Monks said. “Overall, there's been about a 30% increase in 529 business.”
She said
Edward Jones is planning to add more 529 plans to its system this year and even more in 2013.
GREATER EFFICIENCY
American Funds spokesman Chuck Freadhoff said advisers told his firm that having all of their clients' records in one spot would make them more efficient.
The process of setting up the systems to allow for accounts on other platforms, however, is labor-intensive and requires firms to follow rules from Finra, the Securities and Exchange Commission and the Municipal Securities Rulemaking Board, he said.
“There is just more to it when you start keeping records elsewhere,” Mr. Freadhoff said.
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