JPMorgan Wealth Management says it will no longer charge an upfront sales fee for its advisor-sold 529 plans.
Industry standard advisor-sold 529 plans can come with a front-end load or sales charge as high as 5.75%, according to JPMorgan. The plans offer clients a tax-advantaged way to invest money for future educational expenses with federal tax-free earnings and withdrawals, the firm notes.
Other fees will still apply to 529 plans, which could include a program management fee and/or state administration fee, as well as the expense ratios of the underlying mutual funds depending on the individual plan, according to a spokesperson.
The average advisor-sold 529 plan had an expense ratio of roughly 0.9% in 2020, according to a Morningstar report from May 2021.
“We’re committed to making investing more accessible, and this change will help clients put more of their money towards their college investing goals, lessening the burden of higher education costs in the future,” said Kelli Keough, head of digital and client solutions at JPMorgan Wealth Management.
Contributions to 529 accounts are made after tax, but earnings and withdrawals are tax-free for expenses like tuition, books and other education-related costs, according to the Internal Revenue Service website. What makes 529 accounts unique is that there are no income limits on who can open a 529 account and no age cap on the participant or the beneficiary, JPMorgan says.
Some 43% of families use a 529 plan, whether sold by an advisor or otherwise, according to a 2020 ISS Market Intelligence analysis of 529 plans cited in JPMorgan’s College Planning Essentials report. College tuition costs have risen 6% every year on average since 1983, according to that report, which cites consumer price index data from the Bureau of Labor Statistics.
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