Ask Terry Questions 529 Plans — direct sold or advisor sold?

529 Plans — direct sold or advisor sold?

By Terry Savage on September 09, 2018 |

I have two adviser-sold Bright Directions 529 plans for my children. These are the only investments I have with this adviser, who admits to being a novice with college financial planning and strategy and has provided some illogical advice related thereto. Since I will not seek or implement this adviser’s advice for college financial planning, should I transfer the 529s to the direct-sold Bright Start 529s, which charge lower fees?

Terry Says

This is a great question — and it is going to inspire a column in the near future! First, let me say that it is always a good idea to invest in a 529 plan to grow money on a tax-free basis for college.

That said, “advisor-sold” plans like Bright Directions are ALWAYS more costly than “direct-sold” plans like Bright Start, which is sold directly to consumers through its own website:

Why, then, you might ask would anyone buy the more expensive plan? It’s because they don’t know the difference~! And to be fair, it often takes a financial advisor to introduce the concept of tax-free savings for college. Or at least it used to take an advisor, back when 529 plans were first introduced! Now it makes absolutely no sense, to me, to pay advisors fees that are taken out of the investment! But since each state has its own plan, and they didn’t want to offend the brokers registered in their state, this process continues!

First, open new accounts for your children (or open one account, which each child can share) in BrightStart savings, using the website link above. Then, since you can roll other 529 plans into this one, ask them about moving the Bright Directions plan into this one to avoid ongoing additional fees on an annual basis.

Now, I tried to compare fees — but it is a difficult job. Thus I am going to make it a future project and write a column about the impact of fees over the years. Stay tuned!

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