Boasting a track record of steady returns, American Funds has emerged as the top player in the market for 529 savings plans.
Of the $35 billion in total 529 assets, American held $5.3 billion at the end of 2003, according to Financial Research Corp., a Boston investment consultant. American, a longtime advisor-sold powerhouse, gained more than $3 billion in assets from the year before.
As a group, advisor-sold funds held about 65 percent of 529 assets — a huge shift from 2001 when direct-sold funds accounted for 80 percent of assets, and the top player was no-load TIAA-CREF. Driven in part by this trend, FRC predicts that assets in the college plans will total $200 billion by 2008.
The 529 plan is “a difficult product for investors to understand,” says Whitney Dow, director of education savings research for FRC. “There is a tremendous amount of value that advisors can add.”
Many of the earliest 529 plans were prepaid tuition programs designed to cover in-state tuition. However, most of the recent 529 growth has come from savings plans that resemble mutual funds and can be used to cover bills from any institution. Also, to reach a wider audience states have been starting load-carrying programs and plans that can be used by fee-only advisors.