- JPMorgan is eliminating upfront fees for the 529 education savings plans that its advisors sell.
- The bank is looking to set its advisors apart as competition mounts for clients building wealth.
- It is part of a wider effort to offer accessible college savings, exec Kelli Keough told Insider.
JPMorgan is betting that eliminating a fee from a popular investment account meant to help people save for college will attract new clients to its wealth management services.
The bank’s $670 billion US wealth management business is getting rid of the upfront fees typically charged for 529 plans when clients invest in them through a financial advisor. Cutting the initial fee on the plans the bank offers, which previously ranged from 2.5% to 5.75% of assets and vary based on the provider and underlying funds, went into effect on August 30.
JPMorgan is the largest bank in the US, but it has lagged over the years in capturing clients whose money and financial lives it can oversee long-term.
The pricing change shows how it is looking to set itself apart in a highly crowded wealth industry where marketing and cutting fees for products and services have become key ways to compete for new clients. Removing the initial fee taps into another force that US consumers are grappling with: the soaring cost of higher education.
People are generally opening up more tax-efficient 529 plans, in part thanks to legislation enacted in 2019 that included expansions like allowing certain funds to repay student debt or pay for certain apprenticeships. The 529 industry had $398.6 billion in assets as of 2020, up from $88.5 billion in 2008, per ISS Market Intelligence data.
The move is unique for the industry, Kelli Keough, head of digital and client solutions for JPMorgan Wealth Management, told Insider
This is part of a wider effort to make college savings and investing accessible to more clients, Keough said, including placing more bank-produced educational content about 529 plans online and adding features like DocuSign to help move the onboarding process along for clients and advisors.
“As part of those efforts, we also really looked hard at our pricing,” Keough said. “We wanted to allow more people to be able to invest toward college because we know that college investing is one of the biggest costs for people.”
Keough declined to specify what revenue the fees previously drove for the firm or what it will cost. Generally, people can invest in these plans at any major bank and brokerage.
Last year, Morgan Stanley’s financial advisors started offering a 529 plan that it billed as an industry first: clients pay no brokerage charges or commissions on those portfolios, but rather an advisory fee that varies from client to client and ranges up to 2% per year, according to the program’s disclosures.
Most of these plans — known as 529 plans because they are authorized by Section 529 of the Internal Revenue Code — are generally intended for saving for traditional college costs, but some can cover the cost of grade-school education.
“We’ve got feedback from our advisors and clients that folks wanted to be able to use the 529’s and invest in 529’s at the same place that they’re investing other types of funds,” Keough said. “We wanted to make sure that we were as competitive as possible, so that clients would be able to do both when they’re investing with us.”