The college-savings vehicle, 529 plans, are definitely in vogue this year.

The survey suggests a widespread adoption of the new vehicle among advisers, as a large majority (74%) say they will now offer them to clients. However, roughly the same number say they will continue to recommend alternative college-funding vehicles, such as UGMA/UTMA accounts.

The survey reveals that clients are highly receptive to the 529 vehicle, with advisers reporting that a majority (65%) elect to open an account within two weeks of the initial discussion.. 529 Plans are more popular (57%) among clients with household incomes between $50,000 to $100,000, according to the survey. Less than 29% have incomes of $100,000 or more.

Above all, she would like to ensure the vehicle is used properly. "It’s like anything else. They’re the fad of the moment and I’d like to see them used appropriately, not just to stuff money, but [ensure clients] are achieving long-term goals," Norris said.

While the future looks rosy for 529 Plans, some troubling issues remain. Many advisers -- and their clients -- say they are worried about how the sunset laws will affect 529 plans, especially when it comes to financial aid. Though the new tax law allows for tax-free withdrawals from 529 plans when used for college expenses, currently the provision is set to expire in 2011.
However, Kathryn Norris of Professional Asset Strategies in Avon, Conn., says she also considers low fees and a fixed-income option when choosing plans for her clients. She would also like to see more flexibility in the Plans, so that investment options can be changed more than once a year.
When selecting a plan, a variety of investment choices, performance, and fund company service were major considerations. "Just like selecting mutual funds, you want to select a program with [the] best return at the lowest risk, then … you need to understand if there are any wrinkles in the program," said Joe Hurley, president of .
In a telephone poll on behalf of Boston-based Manulife Financial last December, 200 financial advisers were asked to describe their 529 plan selling practices, their own knowledge of the plans, and the typical profile of their 529 investors.

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