Although most parents and grandparents help pay for their kids’ and grandkids’ college education, most producers say 529 college savings plans account for less than 5% of their business, according to a study recently conducted for John Hancock Life Insurance Company, Boston. A recent survey of more than 780 producers, conducted online by Zoomerang for John Hancock College Savings, found 76% say just 1% to 4% of their business comes from 529 savings plan sales.
In contrast, a survey of consumers conducted by Synovate for Hancock found that more than two-thirds of parents and nearly one-half of grandparents have contributed or plan to contribute to 529 plans.
Hancock found that 42% of consumers agreed that the 4th quarter of the year is the best time to sell 529 plans, followed by 24% who said sales were strongest in the 1st quarter, 17% in the 2nd quarter and 16% in the 3rd quarter.
The fact that the 4th quarter coincides with the end of the tax-planning year is probably the reason many producers see a boost to sales of the products late in the year. Still, Hancock also found 53% of producers advocate the promotion of gifting all year long, not just during the 4th quarter.
Consumers apparently agreed, with roughly 46% saying a gift for a child’s college education needed no special occasion. Others said they preferred to contribute at graduation (31.4%), on the child’s birthday (11.7%) or at the child’s birth (5.6%).
Among producers, 29% said they don’t sell 529 plans for the simple reason that their clients don’t ask about them. At the same time, 49% of producers who do sell 529 plans said clients’ college savings resulted from an overall planning discussion, while 45% said it was mentioned in an annual review, and 42% said it came up when a client experienced a life event such as the birth of a child.
When asked about the benefits of 529 savings plans, 84% of producers thought the availability of federal tax breaks was most important to their clients. Flexibility to change beneficiaries was considered important by 82% of producers, and 77% said choice of investment options in the savings plan was important.
According to producers, the characteristics of 529 savings plans most important in their sales were:
–Performance (79% of producers).