Edward Jones and Pershing are making a big push into 529 plans and hope by simplifying access they will entice more advisors to consider them for clients.
Financial advisors have in recent years exited the 529 business in droves, claiming that setting up and maintaining such accounts was cumbersome and antiquated and didn't generate the financial return to make it worth the effort. That's because clients who wanted to open a 529 account often have to go directly to a 529 plan provider to fill out lengthy paperwork and open the account.
In spite of those challenges, assets under management in college savings plans are expected to steadily climb over the next two years, with 529 plans taking a major market share, says San Francisco-based Tiburon Research. The number of 529 accounts is projected to grow from 9.9 million to 10.9 million by 2014, while assets under management will reach $350 billion, Tiburon says.
Boston-based Financial Research Corp. reported that gross sales of 529 plans reached $8.2 billion in the first half of 2012 and are projected to reach an estimated $19.2 billion by year end, according to Paul Curley, director of college savings research for FRC.
Seeing the opportunity, both Pershing LLC and Edward Jones made their own forays into the 529 college plan business this year.
Edward Jones, which has sold other 529 plans since 2002, launched a 529 program on the American Funds platform May 29. Two months later Pershing LLC launched a platform to make the same omnibus accounting available to its client broker-dealers who sell the CollegeAmerica 529 college savings plan, the Virginia-sponsored 529 plan run by American Funds. The American Funds platform makes launching and maintaining 529 plans extremely quick and simple and eliminates cumbersome paperwork, company officials say.
Greg Dosmann, principal partner of marketing and education savings for Edward Jones, says customers can now see 529 accounts on consolidated statements that include other kinds of accounts. "You've got a one stop-shop in regards to if you have a question on any of your holdings," he says. "And it's a non-event from a cost basis for the client. The bottom line is that it's just improved level of service and flexibility and transparency in what's going on in their account."
Pershing is a clearing firm for an estimated 1,400 broker-dealer customers. Its platform allows them to open, fund and trade 529 accounts. The platform also generates customer documents including statements, confirmations and tax reporting. Pershing made omnibus sub-accounting available to its client broker-dealers selling the CollegeAmerica 529 college-savings plan. CollegeAmerica is the Virginia-sponsored 529 plan run by American Funds.
"We've created a more efficient, simpler, time- and cost-effective way for our broker-dealer customers to gain access to the products that they're already purchasing," says Richard Calvario, vice president, product strategy, management and development for Pershing.