Hurley says states are getting more discriminating when it comes to picking plans and maintaining contracts with fund companies that can deliver performance at a reasonable price. A recent case in point: New York state decided to replace TIAA-CREF, a fund provider known for its low costs, with Vanguard, a fund company known for its even lower costs, in August.
With 80 different state programs and numerous other sub-plans in the 529 arsenal, due diligence and historical justification of 529 plan selection will only get more competitive. "I hope advisors are doing apples-to-apples comparisons when it comes to expenses, risk and performance," says Langdon Hughes, a mutual funds analyst who specializes in 529 plans with Morningstar in Chicago. "I also hope they're comparing plans with similar asset allocations. Frankly, there are some really expensive programs out there and some that aren't, so it can definitely pay to shop around."