Morgan Stanley to Launch Advisory 529 Plan

Morgan Stanley's New York headquarters (Photo: Bloomberg)

Morgan Stanley says it plans to introduce an advisory 529 program later this year based on the goals-based approach of its Wealth Management unit, which has some 15,400 financial advisors.

Wealth clients who invest in the Morgan Stanley National Advisory 529 Plan "will not pay brokerage charges or commissions on their portfolios, but rather pay an advisory fee leveraging household pricing," according to the wirehouse.

"This allows for differentiation from our peers. No one else has done this to date," said David Rosen, head of Traditional Investment Products, Morgan Stanley Investment Solutions, in an interview.

"The industry as a whole is moving to goals-based planning, and this [529 product] ties in perfectly with that," Rosen explained.

The North Carolina State Education Assistance Authority will serve as the plan sponsor for this education savings program.

"There's been increased legislation around 529 plans in terms of K-12 education, paying back student loans and other changes governing them," said Rosen, leading to "growing interest" in these savings vehicles.

Program Details, Pricing

For the new 529 program, wealth clients can choose between 11 different model portfolios that invest in Morgan Stanley Pathway funds, which have outside investment managers.

The Pathway Large Cap Equity Fund, for instance, has a net annual operating expense of 48 basis points. Its prospectus also says the associated annual advisory program fees can be as high as 2%.

This yearly charge, though,"is determined ultimately by advisors and their clients" as part of the wealth unit's "overall relationship-based" (or fee-based) pricing, and many clients pay less than 1% a year, according to Rosen.

Wealth clients seeking 529 plans on Morgan Stanley's brokerage platform, where commissions are charged, have some 20 plan options, he adds.

As of March 31, Morgan Stanley has 15,432 advisors. Their average yearly fees and commissions were $1.05 million, and average assets per advisor were $155 million.

Total assets for the wealth unit in the first quarter were $2.4 trillion, with fee-based assets at roughly $1.13 trillion.

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