College Funding market

[Bankman]

"The other problem on this thread is what people assume college planning is all about. It's about repositioning assets into life insurance and annuities to lower the EFC. It's not necessarily about paying for college out of pocket."

The writer clearly doesn't know very much about college planning. Asset re-positioning to lower the EFC is part of college planning, but it only actually benefits at most 33% of families, more like 25%. Most of the time family income is high enough that re-positioning assets won't make a difference. Comprehensive college planning involves college selection, admissions applications, ACT/SAT prep, and many other things, with the most valuable service being able to evaluate financial aid offers made by colleges and appealing offers when it's worthwhile to do so. The college planning firm I'm involved with has a huge database of past clients and other data that enable them to determine whether a college's aid offer is in line with what they've offered to other students with similar academic backgrounds and family financial circumstances. An example, assuming the total cost of attendance is $60,000. Further assume that the college offers grants of $20,000 leaving the family to pay $40,000. Is that a good aid offer? $20,000 in grants sounds like a lot, but given the academic and financial circumstances the college should really be offering $28,000 in grants considering what similar students have recently been offered. There is a huge difference between (a) an insurance agent just selling life insurance and annuities to lower the EFC, and (b) a knowledgeable college planner doing everything else to benefit the student and parents.

 

[DHK]

Um... let me clarify: All of that other stuff you mentioned... would be outsourced to a 3rd party firm to work with the student to determine additional aid, ACT/SAT scores, and all of that. To charge a fee (About $1500 - $3,000) and to collect about half of it... is not where the money is in being in this market. Yes, it includes all that stuff... but that's not why YOU, as a producer, would want to be in this market.

You want to be able to do an analysis of how you can help lower a family's out of pocket expense on college. To maximize financial aid opportunities by repositioning assets to life insurance and annuities so it is no longer FAFSA reportable.

The deal is - if you're only repositioning assets JUST for financial aid... it's not enough of a reason.

Financial Aid Strategies With a Catch

 

[old rookie]

Well said DHK.

 

[Bankman]

The reality is that only 25%-33% of families can justify re-positioning assets - and have the assets to re-position - to lower the EFC; sometimes re-positioning is not in the best long-term interests of the family even if the EFC is lowered. The reason a college planner will want to be part of the other college planning activities is to earn fee income for selling the third party services. I know a fair amount of technical stuff about college planning, but the experts at the firm I'm affiliated with know far more. For most families, their most valuable service is evaluating financial aid offers from the colleges and appealing for better offers; that's worthwhile at least 75% of the time. A true college planner - who may be a licensed insurance agent as well - is much better off if he can share in the fee income because at least 2/3 of the time asset re-positioning won't be advisable or even possible, hence no commission income. The fee income in my situation is over $1000 for a few hours of work. But as I wrote in my first comment, the biggest challenge is getting in front of parents who are open to paying a fee for true college planning.

 

[DHK]

The reality is that only 25%-33% of families can justify re-positioning assets - and have the assets to re-position - to lower the EFC; sometimes re-positioning is not in the best long-term interests of the family even if the EFC is lowered.

That depends on the value proposition of the asset reallocation. It's actually why I position "college aid maximization" as a secondary benefit to my work and my process, rather than as a primary benefit or reason to do it. I like having my work and recommendations stand on their own and not "only" for college aid maximization.

But as I wrote in my first comment, the biggest challenge is getting in front of parents who are open to paying a fee for true college planning.

Agreed. No one is disputing that.

One of the best ways is to turn what is "intangible" into a "tangible". Have your documentation, engagement agreements, satisfaction assurances, fee schedule, all of it ready for people to be prepared to get immense value from the entire process. See the link below for a financial planning presentation by Ed Morrow to the MDRT on how to successfully charge planning fees.

http://chapters.onefpa.org/cinci/wp-content/uploads/sites/3/2014/05/EdMorrowFlyer.pdf

I also agree with you that you, as the producer and/or your staff (if any), should be involved in the process. Having workstations for people to use to file the FAFSA and the other things you said truly show your expertise and commitment to the entire process.

But speaking for myself... that's not for me.

 

[old rookie]

Why is.hard to get parents interested in investing 2-3,000 when it could possibly save them several times that amount over a 5-6 year period of tuition expenses. I would have been happy to do so after sending my two sons through 4 years of undergraduate and 3 yeasts of graduate school. And not mention the hours I spent doing all the research. So bankman, I believe you said the writer, that being me, knew nothing about the college Funding and planning business. I do know quite a bit, but unlike some of the writers I do not consider myelf an expert on multiple subjects. In fact on any subject. I had rather learn from others who been successful at an endeavor and emulator them.
My intent on the initial question was to see if anyone is devoting most or all their time with college Funding. Obviously, I have offended some here, but that was my intention.

 

[Allen Trent]

Obviously, I have offended some here, but that was my intention

I am sorry if any of my responses gave the impression that I am offended. I am 100% not offended & my responses were attempting to encourage caution that you research it fully before committing all hte time & money to market it, etc.

If it is a topic you are passionate about, I say go for it, study it, be transparent & most of all, truly help with the aspects that the parents are most interested in, not just the goal of getting a barrel full of fish to sell life insurance to.

 

[scagnt83]

My intent on the initial question was to see if anyone is devoting most or all their time with college Funding. Obviously, I have offended some here, but that was my intention.

Extremely few agents have long term financial success making "college planning" or "college funding" their main focus.

Why is.hard to get parents interested in investing 2-3,000 when it could possibly save them several times that amount over a 5-6 year period of tuition expenses. I would have been happy to do so after sending my two sons through 4 years of undergraduate and 3 yeasts of graduate school. And not mention the hours I spent doing all the research.

You "would have been happy to do so AFTER..."
Why didnt you before? It's not like college is a surprise... you had 17 years... ?? Im just giving you a hard time. But I make a good point. Human nature is more likely to see the need AFTER the pain occurs. People see the value in disability insurance after they get in a car wreck, after they get cancer, etc. etc. You are also older and wiser now... and probably more stable financially.

Families have a lot of expenses. The reality is that most middle income families dont even have adequate life and disability insurance. The average 401k contribution rate will only fund 25% of the average retirement. And all 3 of those things should come before college savings.

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Then there is the financial side for you the agent. Lets say you average $2,500 in IUL premiums. If you design and fund the product correctly, Target Premium will be around $1k. You make 90% of that, plus 4% on the difference. That is just $960... for something that is a VERY time intensive process.

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Most of the families you meet will not have adequate LI or DI. If they ever die, or become disabled, and are not insured... college funding is non-existent, so are a lot of other things that would have been. Life and DI do a heck of a lot of good for families.

And once you have gained them as a client, start talking about converting Term to IUL or WL. Or sell IUL/WL for the purposes or saving for college or retirement or both. But getting bogged down in the "college planning process" is not an efficient use of time for an agent imo.

 

[pfg1]

The reality is that only 25%-33% of families can justify re-positioning assets - and have the assets to re-position - to lower the EFC; sometimes re-positioning is not in the best long-term interests of the family even if the EFC is lowered. The reason a college planner will want to be part of the other college planning activities is to earn fee income for selling the third party services. I know a fair amount of technical stuff about college planning, but the experts at the firm I'm affiliated with know far more. For most families, their most valuable service is evaluating financial aid offers from the colleges and appealing for better offers; that's worthwhile at least 75% of the time. A true college planner - who may be a licensed insurance agent as well - is much better off if he can share in the fee income because at least 2/3 of the time asset re-positioning won't be advisable or even possible, hence no commission income. The fee income in my situation is over $1000 for a few hours of work. But as I wrote in my first comment, the biggest challenge is getting in front of parents who are open to paying a fee for true college planning.

This is SPOT ON. Been there done it.

The re-positioning of assets is what all the college planning firms push...that you can make big $ by doing this and saving them on the EFC. I disagree that this is the key to college planning and fund. It might be what we'd love to have happen, but in reality thats not how it shakes out.

The reality is, the assets affect the EFC but not so much. Probably 5-6%. The problem is income is the main driver of EFC. And you can't eliminate income. Full service fee based planning IS the way most successful college planners are making money. Yes, they will do financial services for some of their clients, which may result in good commissions. But the majority of families will not be financial clients. One of my best friends has been doing this for 9 years full time, and I know a number of others as well. The college planning firm would have you believe otherwise, that a ton of money can be made by re-positioning assets. In reality, very few client will fit that box that it can help them alot - and actually move forward. Not trying to be a debbie downer, just being realistic based on actual experience.

 

[old rookie]

Correction, NOT my intention.