Expand Your Practice With 529 Plans | Capital Group

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Expand Your Practice With 529 Education Savings Plans

For many advisors, education savings represents an untapped practice-building opportunity. Learn how successful advisors cultivate client interest, build a bigger client base and increase assets under management.

Step
1

Consider the ways that helping clients with an education savings strategy can also benefit your practice

Advisor benefits include:

  • Deeper client relationships. Investors consistently rank college savings as one of their most important objectives. Addressing this and other investment needs can help you fulfill client expectations for more comprehensive, personalized planning.
  • Sizable investments. Advisors often think 529 savings plans only involve small account balances, but in reality high contribution limits coupled with tax benefits may make 529 plans a potentially attractive estate-planning vehicle for high-net-worth clients, such as grandparents.
  • Administrative ease. Options such as age-based target date funds and payroll deduction for employer-sponsored plans clear administrative and logistical hurdles so it’s easy to set up new accounts.
  • The advantages of CollegeAmerica. The country’s largest plan features a number of meaningful benefits, including fees that are among the lowest for advisor-sold 529 college savings plans.*
  • Available in all 50 states and the District of Columbia.

Resources to use:

CollegeAmerica 529 Savings Plan — Learn more about the CollegeAmerica plan.
CollegeAmerica brochure (PDF), CollegeAmerica | Quarterly Statistical Update — Provide clients an overview of CollegeAmerica benefits.
CollegeAmerica Account Forms and Guidelines — Learn how to set up and service CollegeAmerica accounts.

Step
2

Lay out your strategy for growing your 529 business

  • Make 529 part of your routine. Discuss college planning with all new clients and integrate college savings and/or gifting into your year-end tax discussions.
  • Engage emotions. Explain to clients how getting started early and reducing the student-loan burden can make a huge difference in the lives of their children or grandchildren.
  • Tie in education savings with holiday gifting. As holidays approach, suggest that clients contribute a meaningful gift to a loved one’s 529 savings account. Also, May 29 (5/29) is National 529 College Savings Day! Celebrate with an event on the importance of setting aside money for higher education.
  • Bring the conversation outside the office. Give clients a college savings piggy bank after the birth of a child or grandchild. Suggest they earmark all deposits for a CollegeAmerica account.
  • Meet with receptive audiences. Attend a PTA meeting or back-to-school event to provide informational material to parents, school board members and educational professionals.
  • Build a network. Create a network of CPAs and estate attorneys to cover the full spectrum of 529 issues, including tax benefits and student loans. Also consider holding education planning client events for people in similar age groups (new parents, empty nesters/grandparents, estate planners).
  • Prospect local businesses. Find local small-business owners through small business directories, the local chambers of commerce, through business license applications or just by driving around town.

 

Resources to use:

The Case for College Savings — Consider these talking points when discussing college planning with clients.

Step
3

Reach multigenerational prospects and promote the estate-planning benefits of 529 plans

Make college savings a family affair by reaching out to grandparents and other family members to contribute. Explain how they may also be able to take advantage of estate planning benefits associated with 529 savings plans:

  • High gifting limits can help put money to work. Investments have the most potential to benefit the beneficiary when they have the longest possible investment timeframe. Thanks to CollegeAmerica’s high gifting limits, contributors are able to put sizable assets to work.
  • Tax-free wealth transfers remove the tax burden, not the control. You can make sizable lump-sum investments or transfer significant assets out of an estate, including up to $15,000 ($30,000 for married couples) annually per beneficiary without gift tax consequences. Under a special election, you can also invest up to $75,000 ($150,000 for married couples) at one time by accelerating five years’ worth of investments. For gift-tax purposes, the assets are considered completed gifts, but the grandparents — provided they own the accounts — control the assets and the withdrawals.
  • There’s no limit on the number of beneficiaries. The number of beneficiaries for whom they can make gifts is unlimited. Eligible contributions are deducted from their estate, but the account owner retains control of the assets as well as the withdrawals.

If withdrawals from 529 plans are used for purposes other than qualified education expenses, the earnings will be subject to 10% federal tax penalty in addition to federal and, if applicable, state income tax. States take different approaches to the income tax treatment of withdrawals. For example, withdrawals for K-12 expenses may not be exempt from state tax in certain states. Please consult your tax advisor for state-specific details.

Resources to use:

Combining Estate Planning and College Savings (Single Sheet) — Provide 529 prospects with estate planning information.

Step
4

Connect businesses with CollegeAmerica

  • Identify companies that are potential 529 clients.
    • Consider small- and medium-sized companies, which are often overlooked but represent a meaningful opportunity. The automatic contributions for multiple employees can add up quickly.
  • Explain how 529 savings plans are a win-win to employers and employees:
    • No setup costs. There are no account setup or maintenance costs incurred.
    • Minimal administration. Employees manage their accounts directly with your plan's advisor.
    • No minimum participation. While widespread employee participation is welcome, a single shareholder is enough.
    • No upfront sales charge for participants and low ongoing expenses with 529-E shares (available only in employer-sponsored programs).

Resources to use:

How to Set Up an Employer-Sponsored 529 Plan
Employer-Sponsored Participant Brochure (PDF) — Share with employer-sponsored plan participants to explain the benefits of CollegeAmerica.

*Source: 529 College Savings Quarterly Fee Analysis, ISS Market Intelligence, Fourth Quarter 2019. CollegeAmerica’s fees were in the top quartile of 30 and 18 plans based on the average annual asset-based fees for national advisor-sold and fee-based advisor-sold 529 plans, respectively. As of December 31, 2019, CollegeAmerica AUM is $70B.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and CollegeAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. CollegeAmerica is distributed by American Funds Distributors, Inc. and sold through unaffiliated intermediaries. 

Depending on your state of residence, there may be an in-state plan that provides state tax and other state benefits, such as financial aid, scholarship funds and protection from creditors, not available through CollegeAmerica. Before investing in any state's 529 plan, investors should consult a tax advisor. 

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

American Funds Distributors, Inc., member FINRA.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

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