529 Conference 2016: 529 Brokerage Implementation (Omnibus)

By Paul Curley | paul.curley@strategic-i.com | November 12, 2016

Why is 529 brokerage (omnibus) important for advisers and their clients?

The 529 Conference 2016 at the JW Marriott Grande Lakes in Orlando featured a session titled, “529 Brokerage Implementation (Omnibus): Perspectives from the Field.” This was the fourth year in a row that the annual event highlighted an omnibus panel, but it was the first time that it focused primarily on a topic from the perspective of the adviser. This year’s panel was moderated by Chris Werner, CIMA®, Vice President of College Savings Distribution & Investments with OppenheimerFunds and included three panelists of Steve Jobe, Director of College Savings Business Management at Legg Mason, Chuck Ranney, Vice President of Mutual Fund and 529 Plan Distribution at Ameriprise Financial, and Mariann Carson, Vice President of 529 Plans and Education Savings at Raymond James & Associates. This week’s article highlights a summary of the session’s discussion on the importance of implementation and enhancements for advisers and clients, the state of industry implementation, lessons learned from recent implementations, alternatives and stepping stones for industry participants, and opportunities and outlook from a business and operational perspective. This week’s article will provide market sizing data and insight from the panel’s discussion to help you get up to speed with this industry trend.

Market Sizing: Based on data released by Strategic Insight, 529 savings and prepaid plan assets were $272 billion across 13.0 million accounts as of September 2016. This compares to $267 billion across 12.9 million accounts as of June 2016. Based on the size and growth rate of the industry, advisers, accountants and attorneys are leaving money on the table if they are not supporting their clients to and through college financial planning, and the expansion of 529 brokerage implementation will accelerate this opportunity.

Select Panel Topics of Discussion:

—Importance of implementation and enhancements for advisers and clients. First, making the process of doing the 529 business needs to become easier and in line with the way other products are handled. For some, selling 529s continues to be a manual process that makes it difficult to scale the business. Alternatively for Morgan Stanley advisers, selling 529s that are omnibus with them makes the role of the financial adviser more efficient. For example, filling out the account forms can be done online with the client information prefilled so that it is not a manual check and app process. This makes change forms more efficient, and tracking rights of accumulation more efficient. Furthermore, omnibus environment creates a single Morgan Stanley client statement with all accounts on it including 529s, instead of one from Morgan Stanley without 529s and one from the product provider with 529s. By having one statement from Morgan Stanley with all accounts on it including 529s, it makes the process easier for the adviser and clients, and reduces the level of potential conflicts that may arise. Building upon this, tax planning documents all come at the same time instead of waiting for individual forms from different sources. Additionally, the beneficiary and owner management process is simplified as it is driven from one source at the broker-dealer, as opposed to one at the broker-dealer and one at the product provider. As all of the assets are one place, it allows the adviser to do more comprehensive planning and therefore to provide more value to the client as opposed to handling the account and goal separately. Therefore, 529s and college financial planning is taken into the fold of the bigger picture. To the extent that operational enhancements make the workflow of advisers and their client service associates more efficient, more time can be allocated to client relationship management which is an important value driver for advisers and their clients.

—State of industry implementation, and lessons learned from recent implementations. Second, there are seven broker-dealers that currently hold 529s via omnibus and twelve program managers with fourteen plans on their platforms as of publication of this article. Those numbers in terms of broker-dealers, program managers and plans continue to increase on a year-over-year basis. As shared by the panelists, lessons learned are that the participants involved including advisers, broker-dealer firms and product providers need to closely collaborate and communicate throughout the whole process to ensure a smooth implementation and ongoing success.

—Is omnibus for everyone? Alternatives and stepping stones for broker-dealers, states and program managers. Third, there are alternatives and stepping stones that broker-dealers, states and program managers are implementing, and advisers should note that the process for doing the 529 business will continue to improve. Therefore if you have not had the 529 conversation recently due to operational hurdles, you may want to take another look. And if you do not see the level of improvements that you would like to see, make sure your perspective is elevated as firms are implementing enhancements and to ensure your voice is heard as the firms create their operational and product priority lists for 2017 and beyond.

—Opportunities and outlook from a business and operational perspective. Fourth, while 529s have been a more manual process than some other products in the past, the various interested parties including advisers, broker-dealers and product providers are working together to make operational enhancements to make the process of doing the business easier for you as an adviser and your clients. If you have not discussed 529s recently, revisit the conversation as you may be pleasantly surprised in the enhancements throughout the entire product including operations as discussed in the session at the 529 Conference 2016.

Therefore, advisers, accountants and estate planners should know the importance of implementation, the lessons learned to date, the alternatives in place and the outlook for the development. Overall, the enhancements are seeking to support you in your college financial planning discussions with your clients, and have the discussion with your clients and your firm today.