21 July 2019

A New Role for Advisers

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College planning today is much less about doing everything to make sure students attend their dream schools and a lot more about how to mitigate the costs incurred while pursuing a degree. Enter a new role for financial advisers, who are now serving as objective third parties in college planning discussions.

Those conversations with clients sound much like an investment talk, with advisers helping to weigh the costs of different schools, estimate the expected return in terms of the salary ranges of certain majors and size up the business risks of particular professions.

Conversations about college have become more practical, with the costs of higher education far outpacing other consumer prices since 2000 and student debt soaring to $1 trillion, past that of credit cards. Parents increasingly want their kids to attend a college that will not saddle them with too much debt and study a subject that's likely to lead to jobs with ample compensation, and they're looking to advisers for backup.


With the average graduate last year carrying about $30,000 in student loans, young people are burdened with large monthly payments and putting off adult milestones such as buying cars and homes.

Some are saving money by returning to live with parents, and parents watching friends and family deal with this phenomenon are worried about their own empty nests filling back up.

About 80% of parents believe student loan debt could hinder their kids' ability to be financially independent after graduation, according to Fidelity's 2014 College Savings Indicator study, which surveyed about 2,500 parents.

Melissa Levine, an adviser with Voya Financial, recently adjusted the financial plans for clients with a teenager who wants to be a firefighter. Ms. Levine reduced the amount the parents are contributing to a Section 529 college savings plan, as an expensive college would not make sense if that is the student's chosen line of work.

In addition, advisers are pitching in when assessing how much parents and students should shell out to achieve career goals. Six out of 10 parents encourage their children to choose a major that is likely to lead to a better job or salary, according to this year's Fidelity survey, which was released Aug. 20. That figure is up from four out of 10 in the 2013 study.

About 28% of the parents surveyed said they would like their adviser to help them determine what their child's major should be, and 22% said their adviser already is helping with that process.


Parents also are bringing their kids in to talk with advisers more often. Many want students to help pay a portion of college costs so they have skin in the game, so to speak.

Financial adviser Donna Skeels Cygan, founder of Sage Future Financial in Albuquerque, N.M., sat down with her two daughters while they were in high school. She wanted to make sure they understood how much she and her husband would contribute toward college and give them an idea of what they would owe in student loans, depending on their school choices.

Some advisers focus on helping clients pare the costs of college — for instance, by having children attend a two-year community college before transferring to the desired private school. Others suggest sources for seeking scholarship money.

Advisers may also talk with clients about whether students need a gap year after high school, hoping that when the student attends college the following year, he or she will be more focused on completing the degree in four years and securing a job.

Still other advisers recommend giving the family tree a good shake. About two-thirds of grandparents whose grandchildren plan to go to college in the future are contributing financially to support their education, according to a Legg Mason Inc. study released earlier this year.

Of course, some parents are old-school thinkers and want to do whatever it takes to get their children into their favorite schools, even if it means jeopardizing their own lifestyles in retirement or saddling the new graduate with high student loan payments.

Click here to access the full article on Investment News.

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