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2015 529 Prepaid Forum: Top-10 Trends Driving Participation TodayOctober 22, 2015N. Chesterfield, Virginia

www.sionline.com

Paul Curley, CFADirector of College Savings ResearchEditor of 529 DashStrategic Insight, an Asset International Companypcurley@sionline.com@PaulCurleyBC

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Top-10 Trends Driving Participation Today:1) EducationPrioritization & Value Increasing• Creates freedom & independence to

pursue dream careers• Therefore saving for college is importantIssue: Death, Taxes and Student Loan Debt?

Source: Strategic Insight, www.sionline.com

93% of Parents Agree that College Savings is Part of a Holistic Financial Plan

“I want my child to have the best

education”- Parent

(Washington, DC)“529’s are the best plans available for clients that wish to invest in their kids

education”- Parent (Texas)

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Top-10 Trends Driving Participation Today:2) Tuition Inflation/Student Loan Debt

Source: Strategic Insight, College Board www.sionline.com

4% of Parents Project No Increase or Decrease; 33% of Parents Project 8% or More Increase

“Growth of 529 plan business has continued to grow

and I see no reason for it to

slow down especially given inflation rate of

college costs.” –Financial Advisor

(New Jersey)

4-Year Cost of Private Institution in 18 Years:• $429,407 (tuition, fees and room & board)• 4.6% 10-year annual average increase: Private• 5.3% 10-year annual average increase: PublicIssue: Is Tuition Inflation a Real Concern? • Yes: Still high, though gradually decreasing

• Will this impact product demand?

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Top-10 Trends Driving Participation Today:3) Political UncertaintyGoal of Free Community College• President Obama Proposal • Presidential candidate proposals Department of Education• Income Based Repayment• Arnie Duncan steps down• FAFSA updateIssue: Do We Need to Update Contract Language or Products to Facilitate Conversions?

Source: Strategic Insight, www.sionline.com

30% of Non-529 Users Think that 529s are Right for Them

“Under the Obama Proposal, if

community colleges are to be free for the

first two years, I would like to know

how this is an advantage or

disadvantage under the 529 savings plan”- Parent (California)

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Top-10 Trends Driving Participation Today:4) Tax EfficiencyFederal & State• Investment market volatility • Consumer confidence • Job market volatility Value of Dedicated Account for Dedicated Goal

Source: Strategic Insight, www.sionline.com

The appeal of (529) prepaids is the ability to save

on the cost of future tuition, and protection from

market volatility!” – Nancy Farmer,

Private College 529 Plan

68% of Non-529 Saving Parents Reported Federal Government Offering More Tax Incentive as Important Driver

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Top-10 Trends Driving Participation Today:5) Financial Aid PerceptionsWhat Percent Affected?• 24% of non-savers report “Expect

scholarships and financial aid to cover costs”

Issue: Perception of Financial Aid Impact• Is this a real concern?

Source: Strategic Insight, www.sionline.com

32% of Advisors Report “Negative Impact of Savings on Financial Aid Eligibility” as Hurdle for Clients

“Saving more will reduce the financial

aid chance”- Parent (Oregon)“Need to increase college savings,

because expected scholarship and

financial aid will not be sufficient”

- Parent (Texas)

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Top-10 Trends Driving Participation Today:6) Estate Planning/GrandparentsIntergenerational Wealth Transfer• 529s help estate and legacy planningIssue: Money is Motion • Supports 529 planadvisors by maintaining

book of business, and getting new clients

Source: Boston College Center on Wealth & PhilanthropyNational Wealth Transfer and Potential for Philanthropy Technical Report

Source: Strategic Insight, www.sionline.com

$59 Trillion in Wealth to Transfer Down to Heirs (2007 to 2061);Over 90% Move Book During Transition

“529 plans can be done by

grandparents”- Parent (New York)“More marketing is needed to explain the advantages of

these plans, especially to

grandparents”- Parent (New Jersey)

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Top-10 Trends Driving Participation Today:7) Demographics529 Prepaid User Demographics Nationwide• Income

• 44% earn less than $100k (vs. 51% for 529 savings plans)• 68% earn less than $150k (vs. 78% for 529 savings plans)

• Parent Age: 41% between ages of 30 and 39• Beneficiary Age: 31% 5-10; 18% 11-13; 24% 14-17

• 14% over 18 years old (9% 18-21)• Tuition Inflation: 71% project over 5%

• 26% project tuition inflation over 8%Issue: Sell in Smaller Blocks to Expand Distribution?

Source: Strategic Insight, www.sionline.com

32% Report Net Worth Less Than $150k, Compared to 42% for 529 Savings Plans

“I have increased (savings rate in

529 prepaid plan) every year as my

daughter gets closer to college”- Parent (Nevada)

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Top-10 Trends Driving Participation Today:8) Distribution ChannelsEmployee Benefits (New Nevada Legislation)• Government: Income Based Repayment• Private: PWC student loan repaymentFee-Based Compensation Model Increasing• Helps 529 prepaid plans (no-load)

• Issue: Add load to plan?• SMA increasing asset growth (38% 3-Year)

Source: Strategic Insight, www.sionline.com

30% of Employees Would Certainly Open a 529 Account if Employer Offered Benefit.

“Biggest Obstacle is that my

employer needs to offer it as a

benefit”- Parent

(North Carolina)“I have never had an employer turn down offering a

529 plan”- Financial Advisor

(Florida)

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Top-10 Trends Driving Participation Today:9) TechnologyGifting (in lieu of toys or flowers)Robo Advisors (combine gifting & selection)• Broker-Dealer - selection “model issue”Publishing – Cascade Engagement• CRM (client relationship management)• Newsletters, social media, videos

Source: Strategic Insight, www.sionline.com

87% of Advisors Respond that Reducing Paperwork Needed to Set Up and Maintain Account as Important

Functionality in demand: “Ability to

send information about the account to other family members for

birthday and Christmas”

- Financial Advisor(Tennessee)

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Top-10 Trends Driving Participation Today:10) Marketing529 Prepaid & Savings Plans• 55% of parents with prepaid plans in “open states”

also have a 529 savings plan• 86% of parents using both expect to cover majority

of expenses, compared to 76% for prepaid users and 72% of 529 savings plan users

• 100% of advisors selling prepaids also sell savingsIssue: Can we Sell Them Together? (Cover Later Today)

Source: Strategic Insight, www.sionline.com

62% of 529 Prepaid Users Expect to Increase Savings Rate in Plan Over Next 3 Years

“Learn more in just 5 minutes to know

how the plans work”

- Parent (California)

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Top-10 Trends Driving Participation Today1) Education2) Tuition Inflation3) Political Uncertainty4) Tax Advantage/Market Volatility5) Financial Aid6) Estate Planning/Grandparents7) Demographics8) Distribution Channels9) Technology10) Marketing

www.sionline.com

Thank You

Sources: - Strategic Insight 529 I

ndustry Analysis- Strategic Insight 529

Distribution Analysis- 529 Conference 2015- College Board- Boston College Cente

r on Wealth & Philanthropy

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Thank you

www.sionline.com

Thank You

Contact Information: Paul Curley, CFADirector of College Savings ResearchEditor of 529 DashStrategic Insight, an Asset International Companypcurley@sionline.com@PaulCurleyBC