Schwab sweetens 529 plans, cutting fees for active and passive portfolios

Schwab sweetens 529 plans, cutting fees for active and passive portfolios
The firm cuts prices for some active and passive college savings plans by 20% to 45%.
MAY 14, 2015
For clients who have college savings on their minds, Charles Schwab & Co. Inc. just got their attention by slashing fees in their 529 plans. In actively managed portfolios, Schwab is lowering its fees by an average 20%. Expense ratios that were 0.41% to 1.34% will now be 0.41% to 1.01%. Passive index portfolio fees are getting a larger percentage cut — 45% — declining to 0.30% from 0.55%. Schwab offers seven actively managed funds and six passive index portfolios, which are a combination of Schwab and third-party funds. As college expenses continue to rise, the financial industry has picked up on cues and is making offerings like these commonplace. Earlier this month, online investment platform FutureAdvisor started offering free college savings plans on its advisory platform. This may have even come at an opportune time — the amount saved for college was down 25% in 2014 due to parents incurring unexpected expenses combined with lower earnings. 529 plans consist of a number of benefits, including tax-deferred growth and tax-free withdrawals when used on college expenses. The Senate Finance Committee last month approved some changes to the 529 program, including allowing refunds to be reinvested into plans within 60 days without a penalty. The full Senate is expected to pass the bill, which has bipartisan support and already was approved by the House. It would then go to President Barack Obama, who is expected to sign it.

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