How advisors can attract additional assets utilizing college planningArticle added by Jason Lampa on December 20, 2012
Jason Lampa MBA

Jason Lampa


Joined: January 31, 2008

Financial advisors looking to benefit from long-term, mutually beneficial relationships with clients understand the 529 plan is the tip of the iceberg for more lucrative opportunities.

With today's skyrocketing higher education costs, financial advisors have a tremendous opportunity to capture assets from both their existing clients and top prospects, by switching the conversation to college planning. If you do not have these conversations with clients and prospects, someone else will.

Financial planners, historically, haven't been enthusiastic about having college planning conversations, not fully understanding how selling 529 plans can benefit their overall practice. Amazingly, college funding studies show that 69 percent of college savers are advised by a professional financial advisor, but less that 30 percent buy from them. So, why would an advisor give the advice but not do the transaction? History shows that advising on college can lead to full financial planning opportunities.

In the short-term, it is hard to argue with those who take this position; however, those financial advisors looking to benefit from long-term, mutually beneficial relationships with clients understand the 529 plan is the tip of the iceberg for more lucrative opportunities.

There's no question that 529 plans are confusing to both advisors and their clients. If it were not for the complexity, most parents and grandparents would have set up 529 plans without using an advisor. The reality is that more than half of Americans are not aware that 529 plans exist. These statistics hold true, no matter family income levels. Advisors who have success marketing their college planning services tell me that the key is to focus on the benefits, and not the minutia. It is important to control the conversation, steering clients away from questions regarding financial aid and penalties for non-qualified withdrawals.

For those interested in making college planning a profitable part of their business, there are three benefits to focus on in your discussions with clients:
    1) 529 plans are tax deferred investments (Most states provide a deduction or credit)
    2) An effective estate planning strategy 3) Leaving a Legacy
Tax deferral can have a dramatic effect on the growth of an investment. Assets held in a 529 plan not only receive the benefit of tax deferral, but also receive the benefit of tax free withdrawals for those distributions used to pay for qualified educational expenses. Furthermore, depending on the specific state, the account owner's contribution may be partially or completely deductible.

529 plans offer three estate planning benefits: the ability to remove to assets from the taxable estate, the ability to remain in control of those assets, and the avoidance of gift and generation-skipping transfer taxes if contributions stay below the gift tax exclusion limits. There is no other estate planning vehicle available today that offers this type of flexibility.

Saving for college is a major concern for parents and grandparents; however, you may have clients who do not have children or grandchildren. No worries, these clients can benefit from 529 plans as well. Encourage your client to set up a scholarship at a local college utilizing a 529 plan.

Benefits to the advisor

Many of you are familiar with the mythological Trojan horse. Odysseus selected a wooden horse because the animal was sacred to the Trojans, which provided the Greeks the opportunity to get their foot in the door. As a financial advisor, you may have had challenges convincing affluent clients to agree to a meeting. The next time you reach out to them, start a conversation focused on their children. Recently, one of the advisors I have been helping for more than three years landed a $15 million client by hosting a college planning seminar for members of the client's family.

In summary, if you're looking to build good will with both prospects and clients, seriously consider adding college planning to your toolbox. To stay on track, it is important to look at the long-term benefits of this approach. This marketing strategy fits well with the philosophy of those serious about financial planning.
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