Asset Growth for 529 Plans Means Improved Scale, Lower Fees
College savers are likely to see better outcomes from these positive trends.
Leo Acheson: Assets within 529 college savings plans continue to increase. At the end of 2016, 529 plans reached a record high of $248 billion in assets. That represents a year-over-year growth rate of 9%. Direct-sold plans continue to take market share from advisor-sold plans due to a combination of factors, including lower fees and increasingly user-friendly websites. Direct-sold plans now represent 55% of the industry.
This growth in assets has improved scale and helped drive fees lower in 2016. The average expense ratio for all 529 investments decreased by 3 basis points during 2016 to 1.05%. On an asset-weighted basis, the trend was similar, with the asset-weighted average fee falling by 4 basis points to 0.70%. That figure is 35 basis points below the simple average, demonstrating that investors have heavily favored cheaper options.
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