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Financial Planning > College Planning

It’s Graduation Season. Are You Missing a Key Differentiator?

By Liz Davidson

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It’s graduation season, which usually presents parents with a twofold reality check, but also provides an opportunity to advisors.

For parents, there’s the emotional reality check that our children grow up too fast. Then there’s the financial reality check of funding our children’s education. Many parents are optimistic about the ability to send their kids to college, despite the fact that Financial Finesse’s research finds that only 17% of employees are actually on track to retire. According to the College Savings Foundation, 69% percent of parents are still planning to help their children pay for college. The disconnect is evident—people are prioritizing college planning over their own retirement security. 

On top of it, some parents are even tapping their already invested assets to pay for their kids’ college stay. A recent research poll by USA Today found that 7.4% of parents tapped their retirement savings to pay for their children’s’ college expenses, leaving their savings even more depleted in uncertain times. Though this number may seem trivial, it has more than doubled since before the recession.

Advisors working with clients in this position face the risk of clients tapping into assets in their retirement plans or not saving enough due to an obligation to pay for their children’s college. Just as anything else you do with clients, helping your clients plan accordingly can be looked at as either a burden or as an opportunity to differentiate yourself in the industry and attract or retain clients. Going the extra mile and spending more time with your clients around college planning in the context of their overall financial plan can be a differentiator for you and can plant a seed for younger generations who one day may become a valuable client base.  

I recently talked with Lynn O’Shaughnessy, author of The College Solution, who shared with me some tips advisors can use with clients in the “11th hour” college planning phase to help ensure they are educated about the priorities of retirement and college planning.

1) Take advantage of tools to help find free money

Recent legislation has provided some useful tools for consumers in college planning that go more in-depth than past tools to help parents identify free money and the best options for their kids’ college decisions from a financial funding standpoint. These provide parents quick access to tools that compare colleges and university costs and determine which is best for their situations. These tools put together by the Financial Planning Association also provide a great resource for planners to direct their clients without spending too much time or emphasis on college planning and spending more time helping them allocate their investments and fund their retirement.

2) Find the true price tag of higher education

O’Shaughnessy says many parents don’t realize that the more important factor in determining the cost of education is the net price of a college or university, not its sticker price. A net price is essentially the cost after all scholarships and grants are deducted. If your child goes off to a school with a sticker price of $50,000 but received a $5,000 grant from the school, along with a $2,000 state grant, the net price would drop to $43,000. She encourages parents to calculate all scholarships, grants and financial aid their student can obtain and to do extensive research to find free money in these forms.

Scott Spann, one of Financial Finesse’s financial planners, has his own philosophy about this. “I think it’s more important to teach your kids about how to fund college, not to show them Mom and Dad are simply going to do everything for you,” he says. Spann and O’Shaughnessy agree that obtaining student loans isn’t necessarily a bad thing—this can be used to teach kids a valuable financial lesson and help them take their education more seriously.  

3) Check the policies and stats section of a college’s website

There’s a little known secret O’Shaughnessy says about information that’s usually buried on most college or university websites under their “Policies and Stats” section (here’s an actual example). This is where parents can find the average loan, scholarship and financial aid the school pays to students. This can help parents and their kids hone in on schools that are both financially and academically appealing.

Clients continue to expect more from their advisors, many of whom are responding by placing an increased focus on their clients’ overall financial well-being to win more than just their business. Provide your clients with resources to deal with the issues important to their financial lives and reinforce the importance of prioritizing their financial security. Two-thirds of students take out college loans to pay for their education. You can help your clients make sure they’re on track before they attempt to fund their child’s education, no matter what their parental instinct tells them.

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Check out AdvisorOne’s College Special Report 2012 to find out what the Top 15 Best Paying College Degrees are and more helpful information.

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