While industry experts agree that 529 plans and prepaid plans are steadily growing, there's disagreement about whether financial advisors are promoting them enough.

Last year, an estimated 21% of 529 plan sales were sold directly, while RIAs accounted for 19% of sales and broker-dealers accounted for 15%, according to FRC figures.

Meanwhile, independent financial advisors accounted for 59% of 529 assets in 2007, but only 51% at the end of 2010. The bottom line, says FRC's Curley: "While the overall industry has been growing, the advisor-sold channel has been less effective in capitalizing on this trend."

"Several states, including California, have abandoned their financial advisor-sold plans," says Roame. "The 529 plan market is increasingly a direct-to-consumer market." Financial advisors who charge fees now often send people interested in 529 plans off to Schwab or Vanguard to open a plan on their own, since the initial account minimums are so low.

Feirstein says the assets have shifted in the college saving fund market in the last six to eight years. "There was a point in time where the advisor channel, with all those advisor-sold plans, really drove the market, accounting for as much as 75% to 80% of the assets in accounts in the market."

But by the end of 2011, she says, assets had gradually shifted to the plans sold directly, with 50% to 51% of all assets and accounts sold in that channel. "It is not as robust a product as it used to be for advisors," she says. Since these items are full of equities, after they crashed, many clients became suspicious of them, and advisors were not making a lot handling them for clients.

Feirstein says sponsors who sell 529 plans directly to clients may be doing a better job of getting the word out and promoting them. "As these plans gain more business media exposure and consumers hear more about 529s," she says, "people will gravitate toward buying their own college savings plan without professional financial advice."

Case in point: The California State Treasurer last October shut down its 529 plan sold through advisors. Such plans have steadily lost market share to their counterparts sold directly, losing 9% in the past five years. Experts predict the trend will pick up speed as the regulation of the brokerage industry expands under the Dodd-Frank Act.

Deborah Fox, founder and president of San Diego-based Fox College Funding LLC, says the downside to 529 plans is that they offer less flexibility than other financial savings options out there to help clients save for college. "The biggest disadvantage is that clients are only able to make an allocation change twice per calendar year," Fox says.
"That proved to be problematic after the 2008 financial crisis."

Fox says there is some good news: Many state 529 plans are reducing their costs. "They've added new investment options; they got plans that have ETFs now instead of just funds. We have more flexibility now."