For most financial planners, the focus of college planning advice is accumulation based. After all, it seems that almost by definition, "planning" for college means acting in advance by saving up money ahead of time so that the costs can be funded when the child is ready to matriculate. If you just pay as you go when the tuition bills show up, you may be funding college, but that doesn’t really constitute "planning" does it? Yet the reality is that many actions can be taken in the final high school years leading up to college beyond just long-term accumulation planning; however, most planners seem to skip these client conversations about so-called "late stage college funding planning" opportunities, despite the potential for a high impact on the actual client costs to fund college. For the most part, it seems this is by no means willful negligence, but simply a lack of awareness about the strategies that really do exist. We’ve just never had much opportunity for training about how to do this effectively. Until now.
The inspiration for today’s blog post comes from a new training program being launched by Deborah Fox, a financial planner, and creator of both the Fox Financial Planning Network and now the new Fox College Funding Academy. Fox’s new program seems to focus on an area that is severely neglected in the typical financial planning engagement: late stage college funding planning, for the child already in high school and in the home stretch for college matriculation.
In point of fact, I’ve written previously about some of Deborah Fox’s college planning strategies, following a great session she presented at the FPA National Conference in 2010, which highlighted not only college funding strategies in general, but the fact that some strategies remain relevant across the wealth spectrum. My impression is that many planners believe most/all of their relatively affluent clients cannot do anything constructive to mitigate the cost of college beyond saving for it; the assumption is that such clients lie beyond the realm of traditional financial aid, and few other opportunities remain.
However, Fox demonstrates that this is far from reality. Yes, some typical forms of need-based aid may not be available, but have your clients fully explored merit-based aid opportunities? What about other discounts from the "sticker price" for college? Are you fully taking advantage of all of the tax planning opportunities for children heading off to college? And for that matter, have you actually gone back and verified that after applying the Expected Family Contribution (EFC) formulas, your clients really won’t be eligible for any aid? Are you aware of which potentially-multi-million-dollar assets can be completely excluded from financial aid formulas? Do you realize that the calculations are done every year, so families may qualify in the current year even if they weren’t eligible in a prior year? How often do most planners "do the math" each year that a client’s child is in college, to check?
Of course, as noted earlier, the problem isn’t just applying these techniques; it’s that little in our traditional curriculum as financial planners really covers content like this in depth. We are all taught about using UTMA/UGMA accounts, Coverdell Education Savings Accounts, and 529 plans; but they are all entirely long-term and accumulation-centric. Fox is trying to change that, with a training program targeted directly in the area of late-stage college funding planning, which she points out is an excellent opportunity to provide value to clients, and to have a "new conversation" to further differentiate and distinguish yourself with your clients. And the impact can be real. How many months or years of your own financial planning fees would be recovered on behalf of a client who saved thousands or tends of thousands of dollars on the cost of college with quality late-stage planning techniques for college funding? It’s an opportunity to provide an immediate beneficial impact, and a very material one.
So if you’re interested, check out Fox’s new program. Since this is a new launch (or actually, a re-launch of a similar service that Fox provided in the past, but now on a standalone basis instead of via an affiliation network program), there are some discounts available for those who sign up soon.
So what do you think? Is this a useful direction to expand a practice? Would you bill separately for services like this, or just consider it part of your value-add to the relationship? Is this a constructive area to spend time planning for clients? Would you find a focused education program like this to be useful? Are you going to sign up?