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Financial Planning > College Planning > 529 Plans

J.P. Morgan Drops Upfront Fee on Some 529 Plans

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What You Need to Know

  • J.P. Morgan Wealth Management is now offering select 529 college savings plans without the industry standard upfront fee.
  • The upfront sales charge on advisor-sold investments can be as high as 5.75%.
  • Other fees and expenses will continue to apply to the firm's advisor-sold 529 plans.

J.P. Morgan Wealth Management advisors will start offering select 529 college savings investment plans without the industry standard upfront fee, the company said Monday.

The fee, also known as a sales charge or front-end load, on advisor-sold investments can be as high as 5.75%, the firm pointed out.

But other fees and expenses will continue to apply to advisor-sold 529 college savings plans, the company said.

Asked why the firm decided to drop the front-end fee right now, a company spokeswoman said only: “This change will help clients put more of their money towards their college investing goals. We’re committed to making investing more accessible.”

J.P. Morgan didn’t eliminate other fees because the upfront fee “is the only fee that the broker-dealer is able to waive on Class A shares,” she added.

The company noted that college tuition costs are rising 6.3% each year, according to J.P. Morgan’s recent College Planning Essentials report.

The plans provide a tax-advantaged way for families to invest for the future costs of higher education. Some 529 plans can also help cover costs of K-12 tuition, vocational school and registered apprenticeships, J.P. Morgan said, adding there are no income limits on contributions or age restrictions on beneficiaries, unlike other types of accounts often used for education.

But when it comes to 529 plans, direct-sold plans tend to be cheaper than advisor-sold plans, according to Morningstar’s latest annual report on these plans. Fees have fallen across both types of 529 plans, reflecting cost cuts across the investment industry, but they have fallen more for plans sold directly to investors, which charge 0.35% of assets, compared with 0.89% for advisor-sold plans, according to Morningstar.

Advisor-sold plans have higher costs because they tend to favor more costly actively managed funds, as opposed to index funds that are favored by direct-sold plans, and because they usually include 12b-1 distribution fees paid to advisors in their expense ratios.

J.P. Morgan Wealth Management’s website and The Know, its investing education center, discuss common misconceptions about 529 plans, provide details on how they can help families invest for college, and offer the latest insights on the subject.

J.P. Morgan Wealth Management has about 4,000 advisors and about $670 billion of assets under supervision.

(Photo: Shutterstock)


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