Helping Clients Find the Right College Savings Strategy

Steve Dombrower, CFA, SVP of adviser strategy and investment management

Steve Dombrower, CFA, SVP of adviser strategy and investment management at Ascensus talks to PLANADVISER about college savings trends and the role of the adviser

PLANADVISER: What is the state of the college savings marketplace today? 

Steve Dombrower: We’ve seen some good growth; many people are saving. Nevertheless, families are saving in products that could be sub-optimal for reaching their goal. For example, some are utilizing a taxable savings account or an UGMA [Uniform Gift to Minors Act] account in the child’s name. UGMAs can potentially cause problems down the road in terms of receiving financial aid. So, while a lot of money is being socked away, less than a third of it goes into 529 plans. But we continue to see that momentum toward saving in 529 plans increase.

As for new accounts, most are being opened by the Millennial generation. Generation X would be No. 2, Baby Boomers No. 3, and we still see growth from the Silent Generation. That’s great news across the board.

PA: How else do you see ways to improve adoption of 529s? What do you see as the future of increasing college savings?

Dombrower: Over the years, I’ve run into financial advisers who have steered away from the 529 space because they don’t understand it; they think it’s more complicated than it is or has too many fees. So adoption really comes down to education. It’s about organizations such as Ascensus continuously bringing resources to the table for both financial advisers and consumers that will make their research easier, or that point them in the right direction and help them get started. We all know that getting started is key, and that success then breeds success. Often times we see that when families who have been saving for a while get their statements and see the results of a disciplined savings approach, they want to do even more. 

One great tool is the automatic investment plan. These have been known in regular investing for decades: dollar-cost averaging—take the emotion out of it; save the same amount on a regular basis; take advantage of down markets, up markets, and everything in between. 

PA: What other savings opportunities or tools are there that advisers should be aware of?

Dombrower: Our Ugift platform has been around for several years, and we’ve made some tremendous improvements to it. These have led to significant increases in gifting through the Ugift platform. The success of Ugift is partly the technology we introduced, which lets parents, grandparents, friends, family, etc., make gifts electronically and very easily to any of our plans that are hooked up to the platform. But I also think it’s people’s realization that they’re giving a gift of college savings versus some item that the recipient might outgrow or lose interest in. 

On the adviser side, Ascensus has what we call “Quick View.” This is basically a portal through which advisers can see all of their client accounts and download data into whatever program they may be using for portfolio management. We’re also connected to a number of companies that aggregate financial information; an adviser can subscribe to that aggregator and, from there, download financial positions from different providers such as Ascensus. 

At Ascensus, one of our priorities is to make financial advisers’ lives easier so they can grow their practice by helping more families save. 

PA: How can advisers help clients manage competing savings priorities?  

Dombrower: One of the biggest values—besides investment and product expertise—that working with a financial adviser brings is objectivity in helping a family meet its goals. Helping the family figure out, “Where am I going to get the money every month to save for our retirement, our college savings accounts, the mortgage, the car payment, the food bill, and so on?” Sometimes they need that objective person saying, “Why don’t you knock off that trip to Starbucks five days a week? You’ll have $100 a month to put into a 529 account.”

I would tell any family to avoid setting an objective of saving for four years of school. Paying for college for the typical family is usually a mosaic, composed of four to seven different funding sources—what you’ve saved, current income, gifts the student may have received from grandparents, student income, etc. Consider telling families that they need to start early, save often, and set up an automatic investment plan—even if it’s only $20 a month at first. Every dollar saved is potentially one less borrowed; that’s how they can set themselves up for success over time. 

At Ascensus, our average account for the 16- to 17-year-old beneficiary has enough in it today to pay for two years of a public education. That’s not a bad start. As I said earlier, success breeds success—I’ve experienced it personally. 

Nineteen years ago, I received a postcard from New York State about a new 529 plan that was designed to save for college. It was federally tax deferred and tax-free if used for qualified expenses, and, for any money I put into it, I’d get a local/state tax deduction. My wife and I said, “It’s got to be better than just putting the money in a bank account.” So we moved what we’d saved in an UGMA account to a 529 account in New York. We set up an automatic investment plan and never looked back. My older son just finished his freshman year, and, including some—though not a tremendous amount—of merit money because of his SAT scores, he probably has 85% to 90% of his four years of school paid for. It was just being disciplined—starting early, saving often, and just continuing to do it.

PA: Discuss the new resource Ascensus has introduced to provide advisers and their clients with a way to educate themselves.

Dombrower: Howtosaveforcollege.com is an Ascensus-powered website that we rolled out a couple of months ago. It was designed to serve as a one-stop shop or clearinghouse for all things related to college financing. It doesn’t promote any particular plan, but is a site where a family can go to research how to save for college. Compared with some of the other sites out there, it’s very clean, efficient, easy to use, and intuitive. 

It also has a feature in which the user can click on “Find Your Plan,” then pick a state from the drop-down menu to choose from the different plans available in that state. From there, links take users directly to the sites of any of those plans. We felt that we needed to bring this type of tool to the consumer and financial adviser.

When it comes to financial advisers, our tools and distribution team work to explain what helping clients save for college could do for a practice in the long term. Advisers who get involved in this way end up developing good relationships with the kids for whom they’re establishing these plans. That’s a great way to deepen the relationship with the family as a whole, and to have a good shot at gaining the students as clients when they graduate, start working, and need a financial adviser. 

 Visit howtosaveforcollege.com – the authority on 529 college savings plan information and education.