More mutual fund companies, recognizing the need for parents to prepare for their children's future, are training advisers to discuss college savings plans with parents and grandparents.
Firms such as AllianceBernstein Holding LP and Hartford Financial Services Group Inc. have started discussing with advisers the importance of broaching the topic with clients. This month both firms launched specialized marketing campaigns, including sales materials and presentations, for advisers on section 529 plans.
"We found that some advisers were making it a core part of their business, and others weren't tapping into the college savings arena," said Jeff Coghan, director of the Smart 529 programs at Hartford Financial Services.
Of all the college savings products available, the most popular choices are 529 plans, and they are likely to become more popular. In August, Congress made the tax-free status of withdrawals from such plans permanent as part of the Pension Protection Act of 2006. When Congress first allowed tax-free growth and withdrawals in 529 plans in 2001, the provisions were scheduled to sunset in 2010.
In an online survey of 400 parents and grandparents conducted in May and June, Hartford found that 71% of parents indicated they are likely to spend time planning for college education in the next five years, while 66% of grandparents said they are likely to do so.
Moreover, 90% of the parents who discussed a plan with an adviser reported owning a college savings plan. Among those who did not discuss college savings with an adviser, only 57% had a plan.
The survey also indicated that many advisers are not addressing the issue adequately; 55% of parents said they had to ask their adviser for information on college savings strategies, and 22% said they felt the discussion had occurred too late.
As a result, Hartford has launched a "Just Ask" program to encourage advisers to initiate conversations on college savings with clients in three steps. First, according to the program, parents need to be asked if they are saving for their children's education. The majority of parents are eager to discuss savings strategies, Hartford tells advisers.
The next step is to ask grandparents if they are saving for their grandchildren's future, as many grandparents want to help financially, according to the program.
Lastly, advisers need to turn awareness into action and have clients set up a regular investment savings plan, according to Hartford.
The best thing an adviser can do for parents is to use a calculator tool to illustrate how much money they will need to save, not only for one child, but for the whole family, Mr. Coghan said. In the past high numbers have scared parents into inaction, but the numbers will allow a family to get their arms around what they will need to send a child or children to college, so they can work with an adviser to set feasible goals, he said.
AllianceBernstein has launched a "College Savings Crunch" campaign designed to educate parents about the importance of setting and abiding by a college savings strategy, as well as to raise advisers' awareness about reaching out to clients on the topic. Next month the New York firm will hold an interactive Internet conference for advisers.
"Parents have difficulty juggling different savings needs, such as retirement and college savings, and need help planning," said Michael Conrath, the vice president of college savings plans at AllianceBernstein.
In addition to launching its external campaign, the firm is training its entire sales force and staff about the importance of college plans, Mr. Conrath said. The training incorporates the findings of recently conducted research, he said.
Arbab Hassan, a research analyst at 401kid Inc., an investment advisory firm in New York that focuses on education planning, said advisers must "break down the advantages of savings plans, and also explain complex fee structures," to get clients to trust them. "Parents and grandparents are becoming savvier, and firms are losing business because they are looking elsewhere than their adviser to start college savings plans."
The estimated cost of a 17-year-old's college education is $54,880 for a public university and $131,361 for a private one, according to a survey of 1,358 parents that Mathew Greenwald & Associates of Washington conducted in August for AllianceBernstein. Among the parents surveyed, 95% said they plan on helping their kids pay for college, and 41% said they plan to cover all of their children's expenses,
The survey's participants had a household income of at least $50,000 and at least one child under the age of 18 whom they identified as likely to attend college.
However, the amount of money the typical parent plans to save would cover only 23% of their children's undergraduate expenses. Parents with children ages 14 to 17 plan to have an average of $12,000 saved when their child reaches college age, the survey found.
Ms. Papini is an associate editor at
