Why choose a 529 over WL?

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There is no free ride within a 529, just various ways for them to charge ya!


With regards to C shares:

If your client's kid is THAT close to college and would have to sell a C-share before holding it for a full 12 months then I think the ship has already sailed on a 529.

MF's are a buy and hold investment, and the client should never get hit with a CDSC if the rep is making suitable recommendations.

Hands down, the low expenses and high upside associated with a tax advantaged 529 account (with C shares) beats the expenses and limited upside (not to mention sticky tax treatment) of a WL.
 
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Let us get this straight, there is "NO" client! This was just a discussion after a appointment went down as not being all that great. The reason for this discussion is discussion only. Now for my son, that was just a manner of using a live example, as stated his college fund is already 50% paid from his mother's State Benefits. Outside of that I can write a check for the most part with little pain.

Yet, he does have a PWL via MM, I can stick money in now (or start) since it is already enforce for about three years now and, the MEC is of little worry, think I can keep up with that. Yet, this is what I'm thinking, I use the PWL and then set him up on a pay back and replace the money. After he does that I can simply give him ownership of the policy, that'll have a fairly significant amount of CV and DB.

Ps, I don't involve myself in College Funding, not in the past and, I have no interest for future involvement, just so you'll know.;)
 
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slush what you may not understand is alot of bd won't take a C share purchase unless it's under 24 months holding time. You see, the longer you hold a c share the more it costs. people started sueing over this aspect of a c share and bd got cold feet in regards to holding periods. Mine WILL not acept a transaction involving C's with a 5=10-15+ year horizion. Everybody gets paid, the C guys golf at the same clubs with the A and B guys.. nobody lives off of sunshine..

Now I am not saying one is better than the other and neither should you because it all depends on the situation and each situation must be approached on it's own. As you noted there some advantages to a 529, but there also some advantages to a wl as well. FASFA comes to mind right off the top of my head. Having one kid in med school and another a college sophomore the fact that the six figure cash values of my WL doesn't count as an asset against us... is allright.. Ask a family about EFC and how much is expected from families these days....

Now I am not saying what I did, works for everybody. Alot depends on situation and lead time. But one shouldn't discount either choice before looking at the situation and each situation is going to be different.
 
Let us get this straight, there is "NO" client! This was just a discussion after a appointment went down as not being all that great. The reason for this discussion is discussion only.


What is the point of discussing theory without discussing practical application of the theory?

Sorry if I got a little too "real" for ya... geez ;)
 
slush what you may not understand is alot of bd won't take a C share purchase unless it's under 24 months holding time. You see, the longer you hold a c share the more it costs.

I see your point, but what if you sell an A share to client XYZ in year one, but in year two the fund - fill in the blank (is not performing, changes managers, changes strategies, or is no longer suitable due to changes in the client's circumstances).

Instead of making the yearly return--less 1% in a C share. The client now makes the yearly return--less 5.75% in an A share.

Life is crazy, circumstances change and so do funds. Sure, over 12 years the expense would be higher in a C share, but you have to pay for the priviledge of flexibility.

By comparision, you're either locked in for 1 year or locked in for 5.75 years.

PS-- Both A & C have their place, but IMO B shares are for the greedy.
 
"Both A & C have their place, but IMO B shares are for the greedy."

No, not really. B shares are for those who don't have alot of stratch to put down. A shares make much better sense if you have enough money to warrant a discount because they reduce the sales charge and the operating expenses are far less than a C or B.

However, expenses on B shares change with most funds, to A share expenses after 7-8 years (depends on the company) which also happens to be the breakpoint where A make more sense than Bs for small amounts.

B's do work well for alot of people (smaller investor) who are building bank. After they have "bank" they make no sense because of the discounting with A's and most BD at that point will refuse the transaction.

the NASD has a calculator where you can plug in actual mf from any family and compare A, B & C's. Actually, we now have to print the form and have it signed off by the client showing the projected difference.


"I see your point, but what if you sell an A share to client XYZ in year one, but in year two the fund - fill in the blank (is not performing, changes managers, changes strategies, or is no longer suitable due to changes in the client's circumstances). "

The only time I would suggest a mf for college planning is if there is time to hold during a downturn. So you have to have a 10 year horizon really to suggest any kind of equity. Otherwise you could be playing lotto college funding. If that were the case, it would be fine with a year or two downward trend as it would pop up. And I am assuming we're funding over time as well so in year two when it drops... buck up partner there's a "sale going on....
 
LGilmore;48752No said:
And on what planet does it benefit a SMALL investor to pay BOTH a asset based sales charge AND a 12-b1 fee on the back end---with higher fund expenses overall???? Then, when the B share converts to an A, they pay the same asset based charge as a normal A share.

I guess since the asset based charge is built into the expense ratio its easy to overcome objections. Smile to their face, then stab the in the back.

PS - It sounds like your compliance department keeps you on a pretty short leash.
 
There are different ways to get to the same destination. I see the value in both approaches. I think Chumps hit the nail on the head much earlier when he said "use the one that lets you sleep well at night", if you are comfortable with your decision you are more likely to see it through.
 
"And on what planet does it benefit a SMALL investor to pay BOTH a asset based sales charge AND a 12-b1 fee on the back end---with higher fund expenses overall???? Then, when the B share converts to an A, they pay the same asset based charge as a normal A share."

You aren't securities licensed are you? B shares are deffered sales charges. The sales charge only comes into effect if you cash out and only on the principal. You pay a higher expense charge (like a C) than an A, but you don't pay a sales load upfront. So what you're suggesting doesn't happen unless the purchaser is "chasing" returns, if they are doing that they don't understand "friction" and are usually coming out short, no matter what.

Just about any equity should be purchased for a long haul situation. If you plan to pull and yank your money, it doesn't belong there in the first place.

I think you're a bit confused or drinking somebody's kool aid.
 
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