Managing Your Money

Direct-Sold vs Broker-Sold college savings plans

What is the difference between “direct-sold” college savings plans and a “broker-sold” college savings plans?

529 college savings plans vary from state to state as well as within each state. Some of the main differences among the various plans include the plan’s tax advantages, investment options, contribution limits, fees, and expenses. Despite these differences most 529 college savings plans can be classified into two groups in terms of how they are sold to the public – direct-sold or broker-sold (also sometimes referred to as advisor-sold).

Direct-sold college savings plans can be purchased by investors directly from the state that sponsors the plan, the plan’s program manager, or the broker-dealer on behalf of the state. Theses plans are sold without a sales person. Unlike direct-sold plans, broker-sold or advisor-sold college savings plans are sold through third parties that usually receive a sales fee or sales load associated with your investment. These third parties typically include investment advisers, brokerage firms, and banks.

While there are advantages and disadvantages to each type of plan, direct-sold plans usually have lower fees and expenses than broker-sold plans. However, some broker-sold plans can provide access to investments that are not available through other direct-sold college saving plans. As with any investment, be sure to review, understand, and evaluate the various features of each plan along with the fees and costs associated with those plans before investing.

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