N.Y. replaces Columbia Management with J.P. Morgan Asset Management for adviser-sold plan; Vanguard cuts charges
New York's two college savings programs reduced fees for investors under new contracts that started this week.
The Vanguard Group Inc. cut expenses by a third for savers in the $11 billion direct plan. Meanwhile, J.P. Morgan Asset Management took over the $2 billion adviser-plan from Columbia Management Group LLC and announced it is lowering fees and adding new investment choices.
Fees for participation in the direct plan, the nation's largest, will fall to 0.17% from 0.25%, according to Thomas P. DiNapoli, New York's comptroller. Vanguard's investment management contract also was extended until 2019.
J.P. Morgan's assumption of the adviser-sold plan is its first foray into college savings programs. Last weekend, the firm transitioned about 135,000 accounts into the portfolios that most closely match the current holdings and share classes.
The adviser-sold plan now offers investors six age-based portfolios, in which the portfolio mix automatically switches to more conservative investments the closer the student is to college age. It also boasts seven asset allocation portfolios and 16 individual portfolios.
Though lower overall, fees will vary on which investments are chosen and on the share class, said Michael Conrath, director of J.P. Morgan's 529 program.
Class A shares carry a built-in distribution fee, he noted.
For asset allocation and age-based options, fees range from 0.66% to 0.97% for the adviser class and 0.91% to 1.22% for Class A shares. For individual portfolios, fees are 0.5% to 1.29% for the adviser class and 0.75% to 1.54% for Class A shares.
“Looking at plans with comparable investments, there are none with fees as low as this,” said Andrea Feirstein, managing director of AKF Consulting Group. “There is simply no other plan a New York resident could even think of going into” given the low fees and the tax deduction for state and New York City taxes, she said.
With fees this low, it will be more attractive for residents of other states, too, she said.
“New York's plans are improving, which is good for investors,” said Paul Curley, director of college savings research for Financial Research Corp. “The entrance of J.P. Morgan will help broaden distribution of the adviser-sold plan nationally, not just in New York.”
J.P. Morgan said it has relationships with more than 128,000 U.S. financial advisers who can sell the New York plan.
The asset allocation and glide path design of the New York adviser-sold plan will be handled by J.P. Morgan's Global Multi-Asset Group, which manages $74.6 billion in assets, including the firm's SmartRetirement Target Date Fund Series, according to the firm.
The plan also will offer exchange-traded-fund portfolios managed by State Street Global Advisors Funds Management, Mr. Conrath said.
“We believe higher education should be possible for all families and we are always looking for new ways to help them save for that goal,” Mr. DiNapoli said. The changes “will allow us to better help parents save for their children's futures.”
Upromise Investments administers both New York 529 plans.
As with all 529 plans, funds invested grow tax-free as long they are spent on higher education.
New York also offers a state tax deduction of up to $10,000 for a married couple on contributions to the plans.
