College Financial Planning: Adding Value to Client Relationships, While Expanding Your Business

Author: Scot Macfarland, CFP®, CEP EA MPAS Financial Planning Consulting Manager, Wealth Management

Spring is a time of renewal and many high school seniors are looking forward to beginning the next chapter of their lives as they make decisions about which college they will attend in the fall. It’s also a great time to get in front of clients and prospects to talk about college financial planning for their children or grandchildren.

The education of a child or grandchild may be one of the most important investments your clients make. As a financial advisor, you can create significant value by helping them effectively invest and save for a child’s education, while also helping deliver a more secure financial future for the child or grandchild.

College Financial Planning: The Opportunity

In fall 2020, 19.4 million students attended colleges and universities – 11.9 million full time, according to the National Center for Education Statistics (NCES). On average, families paid $26,373 for college in the 2020-21 academic year, according to a study by Sallie Mae.1 But this same study shows that scholarships and grants – money that doesn’t need to be paid back – covered only about 25% of costs.

The benefits of planning for how to pay for higher education are clear. More than half (54%) of families have a plan for how to fund college costs, according to a Sallie Mae study.2 The average amount saved by planners was $28,389 compared to an average of $14,999 saved by non-planners. Offering your clients advice and strategies for funding college for children or grandchildren can save them thousands of dollars.

Making a Personal Connection

The nature of college financial planning is highly personal for families. It goes to the essence of a family’s future and their legacy. And since the planning needs to take place within a prescribed time period, it is also time sensitive.

This makes college financial planning a great way to add value and strengthen existing client relationships. It’s also effective for attracting prospects who have children or grandchildren and building a trusted, goals-based planning relationship with them. Showing these families that you care about their children’s future and helping them plan for this critical milestone builds trust and allows you to better understand their full financial picture. It’s a great way to gain insight into other potential financial opportunities or challenges for the client and gives you an opening to discuss these recommendations with them.

Understanding Solutions

The key to clients reaching college savings goals is starting as early as possible and saving consistently. Let’s look at some of the available options for clients to consider using for college savings.

529 Plans

  • A tax-advantaged savings account offered by states for college and K-12 education costs
  • Savings grow tax-deferred, and withdrawals are free from federal and state tax if used for qualified education expenses
  • Pre-paid tuition plans also available

Coverdell Education Savings Account (ESA)

  • A tax-deferred trust account, formerly called an Education IRA, created by US government to help families who qualify fund education expenses
  • Maximum contribution of $2,000 per year for a single beneficiary
  • Allows a client to increase investment earnings through tax deferral if the funds are used for educational expenses

Brokerage Account

  • Offers flexibility if a client decides to use funds outside of qualified educational expenses
  • Offers more investment options, including individual stocks, bonds and index funds
  • May have to pay as much as 20% in capital gains taxes on any account gains, which could decrease overall amount available for college

UTMA/UGMA Accounts

  • Uniform Transfers to Minors Act (UTMA) or Universal Gifts to Minors Act (UGMA) accounts are both custodial accounts, which are held in the name of the minor but controlled by a parent or other relative until the child reaches the age of majority
  • Allows a client to transfer financial assets to a minor without establishing a trust
  • Funds can be used for anything so can be useful for college expenses, like application and testing fees, transportation costs, and healthcare, which are not considered qualified in other plans

Advanced Gifting Strategies

Clients with significant wealth may want to consider more advanced gifting strategies.


  • An irrevocable trust can be drafted with flexibility to benefit one or more beneficiaries; distributions are allowed for most reasonable purchases and not limited to higher education expenses
  • No maximum funding amount and a lot of flexibility for investment choices
  • Income is taxable and often at a high rate

Appreciated Assets:

  • Clients who need to catch up or add to their child’s or grandchild’s college funding may want to consider last minute gifting of appreciated assets.
  • Parents gift appreciated assets, such as stocks or bonds, to their child instead of selling them. These assets are then sold by the child who has a lower tax rate and can then be used for education expenses.
  • Work closely with a tax advisor if considering this strategy for a client.

Using CRM, Planning Tools, and Resources to Identify Opportunities and Help Clients Reach Their Goals

Incorporating a CRM tool, like Redtail, into your practice and keeping information in the tool up to date will allow you to easily identify clients or prospects who would benefit from advice about college planning for children or grandchildren. You can then use various tools available in planning software like Money Guide Pro, including modules specific to college planning, to help a client understand what option(s) are most suitable for their unique situation.

1” How America Pays for College 2021,” Sallie Mae
2” Higher Ambitions: How America Plans for Post-secondary Education 2020,” Sallie Mae and Ipsos

For more information about education planning, please contact me at

To learn more about Momentum Independent Network, contact Wealth Management at or 833-4HILLTOP.

The paper/commentary was prepared by Momentum Independent Network (MIN). Momentum Independent Network Inc. is a registered broker-dealer and registered investment adviser that does not provide tax or legal advice. MIN and HilltopSecurities are wholly owned subsidiaries of Hilltop Holdings, Inc. (NYSE: HTH) located at 717 N. Harwood St., Suite 3400, Dallas, TX 75201 (214) 859-1800, 833-4HILLTOP. Member FINRA/SIPC

For Professional use only.

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