WealthManagement Magazine

College Smarts

Professor turned adviser Tom Brooks discovered a big demand for advice on education funding. His unique business setup enables him to help thousands. Tom Brooks is an accidental college-funding specialist. He intended to build an asset management practice in 1982 when he set up Alliance Financial Services in Bedford, Mass. But his previous career as a college professor had him rubbing shoulders with

Professor turned adviser Tom Brooks discovered a big demand for advice on education funding. His unique business setup enables him to help thousands.

Tom Brooks is an accidental college-funding specialist. He intended to build an asset management practice in 1982 when he set up Alliance Financial Services in Bedford, Mass. But his previous career as a college professor had him rubbing shoulders with college financial aid executives, who told him a thing or two about what happens when people apply for assistance.

I became starkly aware that the strategies we used to help people save for college costs actually increased the cost of college, Brooks says. Colleges penalize people for saving money in their child's name.

Here's how: Financial aid committees add to a family's income a percentage of what they've saved for college. The committees then make aid decisions based on this income number. That's why 529 plans and custodial accounts are fine for high-net-worth people who won't be eligible for financial aid, but may actually penalize others.

If you've saved $100,000, you've virtually guaranteed you have to pay the whole bill, Brooks says. The fact that you saved to pay a bill is your undoing.

Financial aid is a major issue in Brooks' region. As much as 65% of college students in the Northeast attend private institutions, he says. Qualifying for aid is a sought-after goal since most financial aid packages offered in the region don't require the money to be repaid.

Brooks began to feel it was his mission to educate people about the realities of financial aid and guide them through the process.

Unique New Business

In 1985, Brooks started a second firm, College Funding Advisors. Both firms are affiliated with Commonwealth Financial Network.

As a fee-only financial adviser (both hourly and asset-based), Brooks estimates he's helped as many as 4,000 families with college funding needs. About 1,000 clients work with him on an ongoing basis.

College Funding Advisors charges a set fee that depends on the package of services a client buys. Some people are referred by their financial planners for a single meeting to have Brooks recommend college funding strategies. Another option is to work with him through the entire financial aid application process.

His typical client through College Funding has income between $100,000 and $175,000.

College funding is a tricky service to market, Brooks says. People don't want other people to know they've been applying for financial aid, he says. Clients also don't refer until they receive the aid, when they can see my strategy worked.

Brooks is now focusing on building the asset management practice he envisioned 17 years ago. He has a base of about $30 million under management at Alliance Financial Services. Alliance clients can pay an hourly rate, a fee for a specific financial plan or asset-based fees.

College Funding produced revenues last year of about $150,000, and Alliance brought in another $350,000. Brooks says both firms together are growing at 25% a year.

As my client base increases, more of my clients are turning to me after college planning to do retirement and estate planning, he says.

To help educate prospects, two years ago Tom Brooks created an audio CD that outlines college funding strategies in a nutshell.

The CD features a half-hour portion of his college-funding workshop, which he's given for years. He pays about $1 a copy to have the CDs made.

On the disc, Brooks explains how to prepare assets for college financial aid scrutiny. Among his tips:

  • Put assets in retirement plans because colleges don't count them for financial aid purposes.

  • Transfer assets from the child's name to the parent's before applying.

  • Make sure your tax return supports the numbers on your application.

Brooks expects to turn out close to 5,000 copies of the CD this year. He gives extras to clients to pass out to friends. About a third of the prospects who get the CD set an appointment or come to a workshop.

He also uses the recording to prep other prospects for in-person meetings. I send the CD with a note, Make sure you take a half hour so you understand the questions you want to ask, he says. It makes them more enthusiastic and ready to work with me, and I don't have to explain everything all over again.

Registered Representative welcomes your comments on this story. Contact Editor in Chief Dan Jamieson at [email protected] or call our editorial department at 800/621-0720.

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