Many investment firms and states have adjusted features within their Section 529 college savings plans over the past year to make them easier for financial advisers to deal with and thus more attractive.
Even with plans that are sold directly to investors, companies want advisers' blessings because advisers often steer clients to a particular plan, even if they don't get paid for it.
“The 529s are getting better,” said Marina Goodman, an adviser with Brinton Eaton Wealth Advisors. “They are lower in cost, and there's a greater consolidation among who's managing them.”
The push to attract advisers comes as the percentage of assets in adviser-sold plans continues to slip. Adviser-sold 529 college savings plans accounted for 51% of industry assets at the end of last year, down from 61% in 2005, according to Financial Research Corp.
Although the quality of investment options is important, many of the improvements aimed at advisers are more functional in nature, said Joe Hurley, founder of Saving forcollege.com, which tracks the universe of 529 plans.
“Firms are trying to make 529s easier to transact and easier to bring up accounts on a computer screen, like advisers do with mutual funds,” he said. “They are putting more of the control at the broker-dealer level.”
One change that Wells Fargo Funds Management LLC made to the Wisconsin plans it manages allows advisers to access client 529 plan accounts electronically so that they can take action on behalf of clients. Of course, clients must have signed off on allowing advisers to act on their behalf.
“There's been a great response from advisers on this,” said Sarah Henriksen, Wells Fargo's 529 product development manager.
An adviser survey that Wells Fargo conducted early this year showed that advisers' priorities when it comes to 529 plans are investment variety and performance, as well as service and support.
Wells Fargo has focused on the latter recently, adding a 24/7 call center and an active wholesale team armed with a regulator-approved client presentation.
Maryland, which has only a direct-sold plan, has added an adviser section to its website. In addition to a new set of questions and answers, it includes forms for sending clients information and for ordering bulk literature on the plan, and it shows advisers how to get a copy of their clients' statements.
“We know there are a lot of advisers who want to recommend this plan,” said Joan Marshall, executive director of the College Savings Plans of Maryland.
PACKAGING FEATURES
Packaging these features together will help answer their questions and facilitate that, she said.
Making the paperwork easier is one of the key goals of the industry as it tries to rejuvenate the adviser-sold channel, said Paul Curley, an analyst with Financial Research Corp.
He expects to see other adviser support tools introduced in the coming months, such as making a specialist available to answer adviser questions about plans and to help them through the process.
Although consolidation in the past few years has helped bring down plan costs, new players have been entering the college savings business, including DWS Investments and, most recently, J.P. Morgan Asset Management.
“College savings is seen as a key industry to participate in, just like retirement has been,” Mr. Curley said. “It's also an easy conversation for an adviser to have with clients.”
J.P. Morgan Asset Management is still hammering out the details of what it will deliver over the next seven years under a new contract as investment manager for New York's $1.9 billion adviser-sold 529 plan. That deal was announced July 6.
At that time, George Gatch, chief executive of J.P. Morgan Investment Management Americas, stressed the importance of the firm's “relationship with the adviser community,” and its investment expertise.
Email Liz Skinner at [email protected]
