The FINRA crack down on advisers and broker-dealers who sold recently 529 plans but put their clients into more expensive share classes should be considered as a move in the right direction.
Our nation is burdened with student loans. Over the past 30 years, it grew over 600%, threefold relative to the median family income. With the college cost growing almost exponentially, a lot of parents are concerned about this. Everyone wants to send their kids to college, even though the value of the bachelor degree becomes less and less of the value, but it may open other possibilities once the degree is completed.
So, regardless of the value of the college education in the real world, it is never the less, a real goal for millions of the parents who foresee the future of their children going through the college to start on the path to their independence. One of the ways to put children through college is to start saving early. A 529 plan is a municipal security investor can use to save money tax-free for a beneficiary’s future education expenses ranging from K-12 through college.
However, advisers and broker-dealers can place investors to the 529 plan into more expensive share classes which will result in less money accumulated for the educational expenses resulting in borrowing more money to pay for their children education.
Hopefully, this situation will be remedied by new FINRA incentive by incentivizing financial professionals to initially self-assess all 529 plans sold recently and reimbursing the clients if less cost-efficient share classes were included in the plan. Then they should be offering the cost-efficient share classes from the inception of the plan to comply with the fiduciary obligations.