CFS > SURVEy Results

Advisor Survey Reveals Need for an Enhanced College Planning Capability

A survey of advisors conducted during the NAPFA Northeast Regional Conference in Bethesda, MD, reveals a disparity between parental concern about paying for college and active planning on their part with their professional financial advisor.

These advisor results, based on a survey conducted at the conference by Collegiate Funding Solutions (CFS), a NAPFA resource partner, are illuminating, especially in light of a survey of parents that was conducted and reported by Investment News in their March 20, 2006 issue*.

In the survey published in Investment News*, when asked to list their top financial concerns, parents ranked “Saving and paying for college” fourth, right after “Fear of parent death before children were grown,” “Saving for retirement,” and “Job security.”

Clearly, saving and paying for college and saving for retirement are both emotional concerns for parents. However, if you ask most advisors (and we have spoken with hundreds over the last few years) how many clients with college-bound children are “clamoring” for college planning help, the overwhelming answer is very few. Why the divergence between the degree of concern and the amount of action? How can we account for it?

The survey conducted by CFS provides important insights that suggest that the discrepancy between the concern of the parent on one hand and the lack of action on the other are a result of:

1. Most advisors approach college planning as strictly a question of “saving for college.”  This is confirmed by our survey where 70% of the respondents indicated that they approach college planning as essentially a “saving for college” question.

2. Most parents think that “college planning” is the same as “college savings” – that they are identical (this notion is reinforced by the advisor's approach). Because of this, they see “college planning” and “retirement savings” as mutually exclusive – that one has to be done at the expense of the other. Since few parents are ever comfortable with their retirement savings, there is little wonder why they never get around to college planning.

One reasonable conclusion that can be drawn is that although saving and paying for college is emotional, it never raises to the level of urgency (retirement is holding down that spot) and therefore most parents defer the question of paying for college until the student is a senior in high school.

In addition, the majority of advisors in our survey (54%) rely on the college savings module of their financial planning software, which reinforces the “saving for college” solution.

The CFS survey also revealed that for 75% of the advisors, more than 20% of their clients have college-bound children (27% of the advisors have more than 40% of clients with college-bound children). This, in light of the Investment News survey, leaves a significant opportunity for those advisors to help the parents approach college planning as more than simply saving. This is also corroborated by the number of advisors (95%) who indicated a medium to high interest in offering an enhanced service and those who want to provide a service beyond just savings recommendations (75% of respondents).

The question is, can retirement planning and college planning be positioned as complimentary and synergistic as opposed to mutually exclusive?

The answer is yes – and it begins with the recognition by the advisor that college planning is more than just “saving for college.” It’s implementing college planning strategies that can help the client more efficiently and effectively prepare for college – saving potentially thousands of dollars on their college bill. Savings is only one component. Armed with this “new story,” the advisor can re-educate the client that college planning is not just saving for college, but may include saving “on” college. These college savings can be reallocated into retirement savings, improving the client’s retirement savings outlook. In this way, the client with college-bound children no longer sees college planning and retirement planning as mutually exclusive but as compatible.

College planning – beyond just “college savings strategies” - requires knowledge, tools and resources beyond the information provided for in the typical “off the shelf” financial planning software.

So how are advisors appropriating the specialized expertise needed to provide a more comprehensive and valuable college planning service to their clients? In our survey, 41% of respondents indicated that they either have developed some customized tools (19%) or outsource to a third party (22%). When asked “What factors are important to you in a college planning resource?” the two top responses were timesavings for the advisor (80%) and the ability to perform a variety of what-if analyses (80%).

As the cost of college continues to escalate annually beyond the inflation rate and the one-year cost of attendance for some private colleges approaches $50,000 per year, we expect that more and more advisors will explore ways to offer an enhanced college-planning capability to their clients, one that is compatible with their basic retirement planning needs so that the client doesn’t have to see college planning and retirement planning as mutually exclusive.

*Investment News – March 20, 2006