What is CMFI? We are a shareholder advocacy organization dedicated to promoting the interests, needs, and concerns of individual mutual fund investors. Learn more
On January 30, 2012, the Coalition of Mutual Fund Investors (CMFI) released a study on the costs and expenses of investing in Section 529 college savings plans. Using public information, this CMFI study compared the fees and costs of making mutual fund investments in a state 529 plan directly, with the fees and costs of making the same investments in a state 529 plan through a financial intermediary, such as a broker-dealer or a financial advisor.
CMFI’s study concluded that the fees and costs of investing in the state 529 plans through a financial intermediary are, on average, more than twice as expensive as the fees and costs of investing in state 529 plans directly. The 529 plans sold through a financial intermediary charged an average of 1.18% in annual asset-based fees, compared to an average of 0.55% in annual asset-based fees by 529 plans sold directly to investors. This results in average annual fees that are 2.15 times more expensive for investors. These fee differences also do not include any initial sales charges or annual account maintenance fees that are typically imposed in 529 plans sold by financial intermediaries.
Over a period of 10 years, the cost of a $10,000 investment in 529 plans sold by a financial intermediary averaged $1,944, compared to an average cost of $712 in 529 plans sold directly to investors. This results in an average 10-year cost that is 2.73 times more expensive for investors.
While there are a few 529 plans that may be cost-effective by themselves, an investor is far better off investing in almost any of the 529 plans that are sold directly, at least when comparing the fees and costs of a 529 plan investment. The CMFI study provides comparison data for 30 different states and the District of Columbia. You can review a copy of the study on the CMFI Studies section of our website.