The number of investors who know about a 529 plan and its benefits is the lowest it has been in three years, creating an opportunity for advisors to educate clients, according to a new study by Edward Jones.

More than 2,200 adults were surveyed as part of the firm's 12th annual 529 awareness study, which found that 34% of respondents correctly identified a 529 plan as an education savings tool. That is the lowest since 2020, when it was 45%. In addition, 44% of those who responded said they are not saving enough for future educational expenses.

Juxtaposed with those numbers is an increase in interest in people wanting to save for education. From April 2022 to April 2023, investors’ intentions to contribute to educational savings increased for K-12 to 12% from 8% and for higher education to 12% from 8%, according to the firm.

A major reason for the decline in awareness is the state of the economy, as investors were focused on the pandemic, followed by inflation and market turbulence, according to Steve Rueschhoff, principal of managed investments and insurance at Edward Jones.

“We think that’s driving a lot of the consumer awareness down about 529s,” he said. “There’s a lot competing for consumer attention and dollars these days.”

However, once respondents learned of the benefits of a 529, the more interested they became in them, the survey found. More than a third of those who responded liked the fact that a certain portion of unused assets in a 529 can go toward a Roth IRA. This was a change made possible by the recently passed SECURE 2.0 Act.

There were other factors that respondents liked that helped them increase their interest in a 529. The survey found that 37% liked the tax benefits of the plans, while 35% liked the flexibility to control the 529 account. 

Finally, 33% said they were more inclined to use a 529 plan now that they knew it can be used for qualified education expenses at eligible universities outside of tuition.

“The awareness around 529 is low, but when they hear about the benefits of 529s their interest goes up significantly,” Rueschhoff said. “So that to me is a call to action to financial advisors to get the word out to consumers and their clients around the benefits.”

Education is the primary method to encourage clients to consider 529 plans if they need it, he added. To help clients, advisors should ask the proper questions to determine the needs of their clients, including if they want to save for their child’s education. 

“This is an opportunity for financial advisors to show their worth and show they’re adding value,” Rueschhoff said.

One of the major obstacles advisors must overcome with their clients is a growing fear about the rising costs of education, according to the study.

That fear is causing many to consider alternative forms of education, as only 16% are considering a traditional four-year college compared to 23% who are choosing an online-only college programs and 22% who are planning to attend community college, according to the study.

“That to me is significant in the sense that there’s a lot competing for consumer dollars, but we’ve seen traditional four-year college costs going up out of reach and people are having more student debt than ever,” Rueschhoff said. “You add all that together and the market is doing what it does, which is saying let’s look for alternatives beyond this traditional four-year university.”