(Dow Jones) Financial advisors can benefit from the potentially enormous increase in college savings even if the best option for their clients is a low-cost direct sold 529 college savings plans.

"An advisor should be working on college savings as part of an overall financial plan," says Andrea Feirstein, managing member of AKF Consulting LLC in New York, which advises states and public authorities that administer 529 plans. "The advisor more than ever needs to prove his added value."

A January Financial Research Corporation (FRC) report estimates that the college savings market could more than double in the next five years to almost $1 trillion and that assets in 529 college savings accounts would almost double to $247 billion by 2014.

Bridget Bearden, the report's author and college savings research analyst at FRC, says 529 college savings plans have become more appealing in recent years, especially as fees have dropped, and they've added more conservative investment options such as bank products. FRC expects the direct-sold plans will represent the majority of 529 assets by 2012.

Still, many advisors avoid or limit their client discussions about the plans because they don't understand the products, find the paperwork cumbersome or assume they're not worth the effort because of the typically small initial deposits or because clients are better off in the direct sold state plans.

The FRC study found that 40% of 529 investors had spoken with an advisor before enrolling in a direct-sold plan rather than an advisor-sold plan.

That's often the best choice for clients, says Debra C. Kriebel, a financial advisor with the Pinnacle Advisory Group in Columbia, Md., who recommends that clients consider their state plan first because many states offer investors tax and other benefits in addition to the federal tax benefits.

But that, she says, shouldn't discourage advisors from using the plans because discussing college savings helps advisors get to know clients and build their business.

"I think you get more referrals if you do a good job for clients," says Kriebel.

Advisors also could have a significant impact on whether clients are prepared for college expenses. A 2009 Fidelity report on college savings found that families using an advisor are better prepared for college expenses, in part, because more are saving systematically.

First « 1 2 » Next