At the annual meeting of the National Association of Insurance and Financial Advisors (NAIFA), held in San Diego September 6-8, LifeHealthPro senior editor Warren S. Hersch interviewed Brock Jolly, a financial advisor at Capital Financial Partners and founder of College Funding Coach LLC, a business that acquaints families with strategies to pay for their college children's education and make higher education more affordable. The following are excerpts.
Hersch: Tell me about your business. What's your focus?
Jolly: At the College Funding Coach, we teach seminars, "Little Known Secrets of Paying for College," which explores college funding strategies. The seminars are targeted to parents and offered at schools, businesses and community organizations.
At the gatherings, we help parents to understand how financial aid rules work and determine whether or not their college-bound children will qualify for assistance. Thereafter, we offer a free consultation about developing a comprehensive financial plan, with a particular emphasis on paying for higher education.
Hersch: Will the college funding component focus chiefly on tax-advantaged 529 plans, a popular vehicle used to save for college?
Jolly: One of the misperceptions of both consumers and advisors is that college funding is all about 529 plans. These plans are a tool, not a strategy. For example, if a family could qualify for need-based aid, having their money inside a 529 plan is actually one of the worst things they can do because the investment counts against them for financial aid purposes.
Also, as soon as the investment vehicles get a decent amount of money in them, parents tend to start pulling the money out to pay for college. That's another reason to do comprehensive planning.
529 plans are only a piece of the college funding puzzle; they're not a panacea. Other parts of a plan could involve cash value life insurance, a non-qualified investment account, retirement plan and home equity in a primary residence. These assets are not counted in the expected family contribution at the overwhelming majority of colleges and universities.
Hersch: How many people typically attend the seminars and do opt for the follow-up consultation? Are the advisors engaged in consulting all affiliated with Capital Financial Partners? Jolly: We generally get from 50 to 500 parents to attend the seminars. And about 70 percent of them request a meeting with an advisor. At Capital Financial Partners, we have about a dozen advisors who do the consulting. We also have national partners outside the firm — advisors based in Miami, Philadelphia, New Jersey, and in Richmond, Virginia — who are using our college funding program in their own markets.
Hersch: What distinguishes your program from that of competitors? Do they not also offer comprehensive planning?
Jolly: Many of the competitor programs advocate that parents put all of their money into life insurance and annuities. I think it's somewhat of a deceptive practice to encourage families to put their money into these products solely for the purpose of qualifying for need-based aid if their income would automatically preclude them from qualifying for such aid.
The overwhelming majority of clients with whom we and our national partners meet in our respective markets are fairly affluent. Between 85 and 90 percent of them will never qualify for need-based aid purely because of their income.
As a result, their expected family contribution is well above $60k or $70k. If they have one child in school, they will not qualify for need-based aid. If the parents have more than one child in school, or if one of the parents loses a job, then maybe they'll qualify for aid.
