When planning for my kids going to college, would you recommend working with a financial advisor? Wouldn't the financial planner just pick the right funds for me to invest in or are there other considerations?
A financial advisor can help by educating you on the wide variety of college planning investment vehicles and funding strategies out there. Once determining your personal financial goals and the amount of college expenses you are willing to fund, the planner can help you determine an appropriate strategy (such as a 529 Plan), amount necessary to be contributed each year, as well as a suitable asset allocation.
Regarding your second question, a financial planner absolutely can help guide you toward a suitable asset allocation as mentioned above, but can also help with the following:
Selecting a plan, it is essential to review the fees and expenses of the plan as they tend to vary widely
Determine an appropriate contribution based on your personal financial goal, ages of children, inflation, return of investments, etc. etc.
Construct an analysis to determine if you are on the right track to fully funding your desired amount of the college expenses
Monitoring your plan contributions, asset allocation, and help with rebalancing
They can help first of all by selecting the right 529 plan for your specific need. You can choose plans from another state, but there may be a tax advantage to staying within your state. They can help you determine the best funding strategy for your situation. This can including the amount, timing, and whether a 5-year election is right for you or not.
They can also help you select which investments are best suited to your needs. This may include whether an age-based approach is best or the selection of a specific allocation model. They can help determine if active or passive funds are best as that assessment varies by plan.
There are other nuances with which they can help as well. That will depend on your situation and the specific abilities of the adviser.
When it comes to 529 Plans, there are direct offered plans where you work directly with the mutual fund company such as Vanguard and then there are the advisor-offered plans. There are pros and cons for each type. Selecting an advisor-offered plan would mean you would have the financial planner select the appropriate investments within the line up of mutual funds and make changes on an as needed basis whereas in a direct plan, you're pretty much on your own. However, the costs are higher in the advisor-offered plans as the advisor's compensation is usually built into it.
And advisor should help you select the proper asset allocation for a 529. plan, but there are numerous considerations when deciding how best to save for college. For instance, if you have a child who earns a scholarship and doesn't need the money in the plan there are tax consequences associated with getting the money out of a 529. You can change the beneficiary on the plan (to another child, for instance) but if you find yourself with a pile of college savings and no need for it, you'll end up paying a penalty if you pull the money from the 529.
Advisors should be able to help guide you to the best solution! Certainly there are advisors in this community that would be able to help with such questions.
Great question. Here's one benefit I can think of: as a financial advisor I have the ability to help a business set up a 529 plan for the employees. In doing so the employees are able to invest in American Funds at Net Asset Value (0 cost). Ordinarily these funds can have a sales charge of up to 5.75%. So, by working with an advisor to help you set this up for your employer, you would be 5.75% closer to your goal the first year!
More importantly, the advisor should look at your financial situation and make sure that you have prioritized and are funding your goals in the proper order.