Advisors, Families, & 529 Plans: Starting the Conversation

Have you heard the news? 529 Plans have changed in a big way. The so-called “One Big Beautiful Bill Act” passed last year included several changes to the education savings plans. Now, 529 Plan holders have more options to plan for their child’s educational future, but many advisors remain outside of that conversation.

Key Takeaways

• The OBBA has big changes to 529 Plans — for more than just plan investors.
• Those changes offer a window of opportunity for advisors to connect more on client education goals.
• With the needs in 529s changing, ETF innovation can help.

Advisors are facing a lot of changes right now, not least of which include an ever-changing investment landscape for clients. With the growing availability of ETFs and the ease of use offered by online platforms, sometimes it can be difficult to remind clients of the advantages advisors can offer. 

529 Plans Are Changing; Will Advisors Keep Up?

529 Plans are one of those areas where, although advisors can help a lot, many families tend to go it alone. According to a survey conducted by Edward Jones and Morning Consult, some 78% of respondents do not consult an advisor when making decisions related to 529 plans. Just a little more than 20% “say that working with a financial advisor would help them feel better about covering the costs of future education expenses.”

Could that change? The new 529 Plan rules may see more clients look to advisors for help. Before that happens, however, it may behoove advisors to preemptively ask about clients’ 529 Plans for their kids. 

For example, previously 529 Plans had limits on usage. However, the OBBA changed that. Under the new law, 529 Plans can pay for additional costs in K-12 education like AP testing, certain tutoring, tuition, books, supplies, and more. They can also be used for particular post-secondary education programs outside of the traditional university setting. 

See more: Are Dividends Back? This Dividend ETF SPHD Soared in Q1

Where historically parents would save and save to hit a certain target amount to pay for a four year degree, 529 Plans now offer more flexibility — but also complication. In the past, one would not expect to tap the plans before the beneficiary went to college. Now, it can pay for other needs on the road there. 

Before, the plan helped families get from A to B — but now, there are detours. That’s where the advisor can be a value add. Especially as new investment tools have proliferated in the ETF wrapper to help pay for certain time-gated needs, or adapt to markets, advisor input can really help. 

That’s why now may be the time for advisors to ask about client 529s and retool their value add pitch. When 529s are considered as part of an overall portfolio, advisors can really lend their expertise. The new 529 Plan changes can offer a useful hook for advisors wanting to offer their services and bring those assets into the overall family plan.

Originally Published on Advisor Perspectives

For more news, information, and strategy, visit ETF Trends.

Earn free CE credits and discover new strategies