Web sites that provide an array of information to would-be 529 plan investors are focusing more and more these days on pairing financial planners, advisers and registered reps to those investors.
Sites like Savingforcollege.com, and the recently launched Investforcollege.com supply online visitors with more than a calculation of future college education costs or what to evaluate in choosing a 529 plan. These sites actually hook investors up with financial advisers who can decipher which state's plan is right for them, walk them through the process and help them invest Junior's future college tuition, room and board.
In fact, culling the ranks of financial consultants and advisers has become a new business model for 529 Web sites.
Investforcollege.com, which just officially launched this month, is the brainchild of Burt Baker, a fee-based planner and owner of 1693 Asset Management in Williamsburg, Va. About 18 months ago, Baker staked his claim to the domain name, then began developing the site as a sideline. "When they first came out, 529 plans were meant to be an estate-planning tool, but now they are mainstream," Baker said. "The mutual fund industry has really taken the ball and run with it," he noted. "Now even lower-income families are looking at this."
Investforcollege.com offers an array of useful information and will be adding its 2005 five-star plan rating system in February. The rating system is currently in place at the site but ratings are based on 2003 data.
According to Baker, the rating system uses quantitative measures that include: the cost of the underlying investment; the cost of the plan, which includes administration charges and fees; and the underlying mutual fund performance. But the metrics also compare the cost of investing in the funds through that 529 plan with what it would cost in a non-529 plan, such as a Uniform Gift to Minors or an account in the parents' name.
The result is a "total cost of plan" number that is then translated into a star rating with five stars being the best rating achievable. A negative total cost of plan number, such as that produced in Hawaii's 529 plan, which utilizes funds from Delaware Investments, would earn the coveted five-star rating.
Filling in the Ranks
But it is the Investforcollege.com's behind-the-scenes financial adviser-driven revenue model, that is the most interesting.
Site visitors get a free suite of standard information that includes access to most of the details of the five-star rating system. Premier membership, which costs $49.99 per year, includes access to deeper ratings metrics, contact with a financial adviser and the ability to purchase from any 529 plan on a load-waived basis. Baker hopes the elimination of the up-front load alone will attract investors, noting that a family saving $200 a month and paying a 5% up-front sales load on their annual investments of $2,400 would be paying $120 a year in commissions.
For advisers looking to work with college-saving investors, they can join Investforcollege.com's Advisers for Affordable College Education (AACE) program for $300 a year, which essentially gives them exclusivity on leads from a territory of their choice. Baker has divided the nation up into 500 metropolitan areas that he is selling as protected territories. Any premier investor who requests the help of an adviser is put in touch with the adviser who "owns" that territory.
As a further incentive to spur advisers to join the AACE program, Investforcollege.com is also forwarding investors' $49.99 site membership fees to them. Even if a premier member decides not to seek the services of that adviser, the membership fee still gets paid to that adviser, Baker said. "At $300 a year, if you have six clients, an adviser's membership is paid for," he noted.
But the real opportunity goes beyond the 529 plan assistance, he added. Once Investforcollege.com has married planner and client, it's strictly hands-off and the two are free to work together on other aspects of financial planning if they should so choose, Baker said.
For his part, Baker plans on making a profit through the advisers' $300 membership fee and is optimistic he can sell all 500 metropolitan areas, which would net him $150,000 a year.
Stamp of Approval
Savingforcollege.com, a veteran 529 plan information site run by Joe Hurley, who is also a CPA partner with The Bonadio Group of Pittsford, N.Y., is also tinkering with its college savings plan network of advisers. Earlier this month, the site announced changes for the financial advisers, brokers and consultants who have signed up to list themselves on the Web site's 529 Pro Directory. The directory allows investors to find an adviser to work with based upon matching zip codes.
For a basic annual listing fee of $495, advisers have been listing their contact information within the site directory. If an adviser wants to list multiple offices, they must pay additional listing fees. For a platinum listing, $695 a year, Savingforcollege.com will list advisers at the top of the page, ahead of others paying the basic fee.
Soon, Savingforcollege.com will begin requiring all advisers who maintain directory listings to become specially 529 plan certified. While its network of advisers must currently pass a 25-question online competency exam in order to be qualified for listing, a more formal certification program is in store for all who renew their directory listings, Hurley said. The Web site will also charge an annual $495 fee for this certification.
In addition to the competency exam, the new certification program will require minimum levels of experience, annual continuing education credits and adherence to ethics requirements. "The scope of our certification is much narrower than most of the [other] recognized professional credentialing organizations. We will not be competing against them," Hurley said. Moreover, he expects the new certification to appeal to a broader audience, even those with no interest in a Savingforcollege.com directory listing, such as tax and legal professionals, product managers and internal staff members.
Certainly, there are other college savings professional designations. In mid-2002, for example, the National Institute of Certified College Planners (NICCP) debuted its Certified College Planning Specialist designation. Since then, a few hundred professionals have been certified. The program requires the passage of tests based upon three areas of self-study surrounding college savings, as well as 12 hours of annual continuing education. Full program costs can run up to $1,275. The NICCP also requires an annual membership fee of $295.