Hancock Survey Sees Opening For 529-Plan Advisors

By Cyril Tuohy

InsuranceNewsNet

A new John Hancock Investments survey of affluent investors has found them receptive to investing for college. However, relatively few of them own a 529 college savings plan, which points to an opening for financial advisors in that segment.

The survey of 1,203 investors conducted in August as part of John Hancock’s Quarterly Sentiment Survey found that 70 percent of investors with children or grandchildren plan to contribute to their college education, and that 62 percent have started saving.

However, only 24 percent own a 529 college savings plan, although 55 percent believe it is a good time to invest in one, the survey found.

John Bryson, head of product management and college savings with John Hancock, said the gap shows there’s an “excellent opportunity” for advisors to step in and help investors understand the benefits of the 529 plan.

“We are encouraged by the high degree of interest in funding college education among investors, and the degree to which they are already saving,” Bryson said in a news release.

Families saving for college have more pronounced investment characteristics than, say, the broader retirement segment.

Because college is so expensive, and since there’s only an 18- or 20-year investment horizon before a child attends college, investors have realized the importance of putting money aside early — the day a child is born and eligible for a Social Security number.

Of the respondents who started saving, 65 percent began when the child or grandchild was born, the survey found.

The survey also found that families investing for future higher education tend to save substantial amounts.

<p> More than one-third of investors who plan to contribute to the cost of college education expect to contribute half or more of that cost of college, and 20 percent plan to pay more than three-quarters of the cost of college, the survey revealed.

Data from the Investment Company Institute (ICI) would seem to corroborate the results of Hancock’s latest survey. ICI data show that while 529 plan assets are growing at a healthy clip, 529 plan accounts are not growing as fast.

Assets held in 529 prepaid tuition and savings plans at the end of last year reached $227.1 billion, a 19 percent increase from the $190.7 billion in assets at the end of 2012, according to the ICI. The number of plan accounts, by contrast, reached 10.4 million at the end of last year. This is an increase of only 5 percent from the 9.9 million 529 plan accounts at the end of 2012, the ICI data show.

Savingforcollege.com estimates that the projected four-year cost of a private college for a student enrolling in 2033, in 19 years, will be $323,900, and that the average cost of a four-year degree from a public university for in-state residents will amount to $94,800.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.