CollegeChoice Advisor 529 Plan: Investment Plan Review

As the rising cost of college education continues to outpace inflation, 529 college savings plans have been gaining in popularity. Since they were first introduced nearly two decades ago, their fees have been decreasing, and their features and flexibility have been increasing. At the end of 2014, nearly $250 billion has been invested by those looking for a tax-efficient way to save and pay for college. Forty-eight states now offer 529 savings plans that are available to all U.S. residents.

Indiana offers two plans: the CollegeChoice 529 Direct Savings Plan and the CollegeChoice 529 Advisor Plan. They both offer the same features and investment options, but one is sold directly to the public while the other is sold through financial advisors. Both are managed by Ascensus, Inc., which is a national provider of 529 plan administrative and investment services.

CollegeChoice 529 Advisor Plan Basics

The CollegeChoice 529 Advisor Plan is highly rated, earning one of 21 bronze medals awarded by Morningstar in 2014. It was also given a rating of 4.5 out of five by in 2015. Through the end of 2014, the plan had $1.65 billion in assets under management (AUM) with 156,262 participants. The plan has been managed by Ascensus since September 2008, when it replaced JPMorgan.

The plan is feature-rich with maximum flexibility for contributions and beneficiary changes. The minimum initial contribution is just $25 and $25 for subsequent contributions. You can contribute to the plan as often as you want until the account balance reaches $298,770, at which point it is capped. In addition to the tax advantages enjoyed by all 529 plan participants, Indiana residents can receive 20% tax credits up to $1,000 on contributions to the plan.

The plan charges an annual program management fee of 0.34% and an administrative fee of 10%. An account maintenance fee of $20 is waived if the combined balances of accounts under one owner exceed $25,000.

The CollegeChoice Advisor Plan includes a menu of 19 investment options allocated among three types of portfolios: year of enrollment portfolios, individual portfolios and savings portfolios.

Year of Enrollment Portfolios

Similar to an age-based or target-date fund, a year of enrollment portfolio lets you choose from a range of time frames.

You select the portfolio that most closely aligns with the student's estimated year of enrollment. Portfolios with longer time frames are allocated towards more aggressive growth profiles, and portfolios with shorter time frames are more moderate and conservative, depending on the length of time before enrollment. Over time, the allocations shift from aggressive posture to more conservative postures. The portfolios are all invested in iShares exchange-traded funds (ETFs) managed by BlackRock.

Individual Portfolios

If you prefer to manage your own asset allocation, you can choose from 10 funds in three asset classes: equity, international equity and fixed income. The fund array includes funds from top providers, such as BlackRock, T. Rowe Price and PIMCO. You can purchase or sell each fund 60 times throughout the year, and there is no waiting period for repurchasing after funds are sold. The average expense ratio is 0.63%; the actively managed funds charge between 0.93 and 1.29%, and ETFs charge as low as 0.15%.

Savings Portfolio

If you don’t want to take any risk, the savings portfolio invests all of its assets in the Sallie Mae High-Yield Savings Account. The funds are held in trust by the Indiana Education Savings Authority, and they are insured by the Federal Deposit Insurance Corporation (FDIC).

How Does CollegeChoice Advisor Compare?

The CollegeChoice Advisor Plan compares favorably with other highly rated 529 plans in terms of overall quality, but its fees may be on the high end.

For example, the Vanguard 529 College Savings Plan is another Ascensus-managed plan for Nevada. It offers participants a wide range of Vanguard index funds, but none with expense ratios higher than 0.49%. It also offers more investment options for both the age-based and individual portfolios. The Vanguard Plan is direct-sold, while the CollegeChoice Advisor Plan is advisor-sold. The Vanguard Plan does not charge any sales loads, while the CollegeChoice Advisor Plan does. The amount of the sales load varies depending on the class of shares purchased.

Indiana's other plan, CollegeChoice Direct, does not charge a sales load either. Participants who are more knowledgeable and better equipped to make their own investment choices might choose CollegeChoice Direct, while participants who would like the guidance of a financial advisor may prefer CollegeChoice Advisor.

Category: Advisor

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