According to FRC’s latest college savings market study, Evaluating the College Savings Market Opportunity, it expects 529 savings plans will represent $247 billion of the overall $937 billion in college savings plan assets by 2014. “[I]t is clear that this product has further opportunity for expansion. And in order for program managers to capitalize on this opportunity they must truly understand their target market, offer the right product features, and distribute their product effectively,” stated Bridget Bearden, study author and college savings research analyst at FRC, in a press release.
FRC found two trends taking off right now in the 529 world: lowering the all-in cost of the plan for investors and adding ultra‐conservative investment options, even bank products, to the platform. Forty percent of direct-sold plans expect to improve fees and expenses in the next year, while 60% of direct-sold plans and 44% of adviser-sold plans expect to improve investment options.
“We expect these trends to last several years and to have significant appeal to fee‐sensitive and risk‐averse consumers,” Bearden noted.
According to the study, 40% of adviser‐influenced 529 account owners are enrolling in direct‐plans, bypassing traditional adviser‐sold plans. “Our financial adviser and program manager survey results revealed a significant disconnect in the value wholesalers deliver in the college savings arena,” said Bearden. “We believe this challenge can be overcome by taking different approaches, such as focusing on the cost‐sensitivity of savers.”
The study report can be ordered on http://www.frcnet.com.