Part III: The Changing College Planning Paradigm: Implications and Opportunities for Financial Advisors

4 min read
July 03, 2017

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Use these links to read Part I and to read Part II

In this final installment of the three-part series on The Changing College Planning Paradigm: Implications and Opportunities for Financial Advisors, I'll conclude with a very practical application of enhanced college planning (beyond just savings strategies) that may help to solve a significant long-term challenge for many advisors.

Let me start by posing a few questions concerning your practice:

  • Do you have clients that are grandparents?
  • Are their children your clients?
  • Do you want them as clients?
  • What will happen to the assets under management when your clients die?

The challenge many advisors are facing today and especially over the next  10-15 years as the Silent Generation (1925-1946) passes away is maintaining assets under management when the heirs are NOT clients of the advisor. The result for many advisors may be a significant exodus of wealth from the firm over time.

So what’s an advisor to do – especially when they don’t have any substantial relationship with the heirs?

Turns out that a basic application of college planning concepts can provide a solution to the vexing problem in instances where your clients are grandparents who will be helping fund their grandchildren’s college education.

Here’s why and how:

First the why:

  • About 40% of grandparents say they're currently saving for their grandkids' college expenses, according to a survey conducted by Fidelity Investments. These grandparents say they are going to give a median of $25,000 to all their grandchildren; and 35% are planning to give $50,000 or more. This probably describes some of your clients – especially the more affluent ones.
  • The driver for college costs for MANY families is the EFC (See installment #2) – which determines in large part whether or not the family is going to qualify for financial aid from the school.
  • The common strategies below that grandparents use to help pay for college costs CAN drive up the EFC  with the unintended and unwanted consequence of decreasing the family’s eligibility for financial aid, thereby INCREASING family out-of-pocket college costs (ouch!).  
    • Saving for a grandchild using a 529 plan
    • Gifting money directly to the student or the parents to be used for college costs
    • Paying the college directly for college costs.
Now the how: 
  1. Offer an educational opportunity for your clients that fit the profile - grandparents that are helping fund the grandkid’s college education. Possibly family meetings for a few select high net worth clients or an educational seminar for a broader audience (a webinar is a good option if the children aren’t local). Educate them about the potential impact on financial aid eligibility based on the common strategies listed above and provide alternative options.
  2. Schedule a follow-up family meeting (grandparents and their children). Provide an EFC analysis for the family and evaluate the grandparents’ college funding strategies in light of the results. You can help to ensure that the family has the actionable information needed so that the grandparents’ role in college funding is in all parties’ best interest and yields maximum benefits!
  3. Creating this kind of unique value, concerning a topic of great emotional importance to the family puts you in a position to
develop and cultivate personal and business relationships with the next generation. When the time comes for the assets to transition to the heirs (children) they’ll more likely stay under your management because of the family relationships you established and the value you provided.

This is just one concrete example of how you can directly benefit from the changing college planning paradigm to drive more value for your clients and revenue for your business!

What if this practical application of college planning helps you retain the assets on one large client? How much would that be worth to you? Do you have clients with 2, 4, 10 million under your management? Do they have grandchildren? Are they helping pay for college? Do you know? My guess is you soon will!



Roger_Lorelle.jpgAbout the Author

Roger Lorelle is President of Collegiate Funding Solutions (CFS), an XYPN discount partner. CFS equips XYPN members to help clients save ON, and not just for, college costs. CFS’ college-planning software, support, education and marketing material enable fee-only advisors to deliver the college-planning value Gen X parents need today and grow their business and revenue in the process.

Collegiate Funding Solutions (CFS) is a new XYPN Discount Partner. CFS equips XYPN members to help clients save ON and not just for college costs. CFS’ college-planning software, support, education and marketing material enable fee-only advisors to deliver the college-planning value Gen X parents need today and grow their business and revenue in the process.



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