How Satisfied Are Consumers With Their 529 Plans

Intro: According to Sallie Mae's How America Saves for College 2015, 27% of American families saving for college are using 529 plans. But how happy are they with their plans? In 2015, Savingforcollege.com surveyed 294 readers who were using 529 plans to save for college and used the Net Promoter Score methodology to gauge their satisfaction with those plans. Net Promoter Score You may not be familiar with the Net Promoter Score (NPS), but you've probably been asked to respond to an NPS survey. This simple one-question survey asks respondents how likely they are to recommend a brand, product or service to their family and friends using a 0 to 10 scale, where 10 is very likely, and then asks for feedback on why they chose their score. Frederick Reichheld first introduced the concept in a 2003 Harvard Business Review article, where he explained that his research indicated that this single question was a strong predictor of customer loyalty and company growth. Since that time, NPS has been adapted as a key metric by numerous organizations large and small. Here's how it works. Responses of 9 or 10 are considered Promoters; responses of 7 or 8 are Passives; and responses of 0 to 6 are Detractors. To calculate the NPS score, the percentage of Detractors is subtracted from the percentage of Promoters. The scores can be compared to those of competitors or to industry benchmarks to see how a company is doing, and it can be monitored over time to measure improvement. Our Results Respondents to Savingforcollege.com's 529 Plan NPS Survey were using a wide range of 529 plans from across the country, so these results are not specific to a particular plan but may provide insights for the industry as a whole. 42.0% were Promoters, i.e., they were very likely to recommend their plan to a friend as measured by a response of 9 or 10. But 31.4% were Detractors, meaning they responded with a 6 or less to indicate their likelihood to recommend. So the NPS score for 529 plans overall was 10.6. What does this mean? Is this a good score or a bad score? A positive NPS means that 529 plans have more Promoters than Detractors, but in this case there is certainly room to improve. The website NPSbenchmarks.com provides a benchmark NPS score for the Financial Services sector of 35.09 (based on 59 companies). Among the companies included in this benchmark score, individual scores range from 92.25 to -41. Fees and returns were among the positives cited by respondents about their plans when explaining why they'd recommend. Other reasons given were: "Easy to set up and contribute," "Low expenses," "Excellent returns," "Integration with Upromise," "Good variety of investment options," and "It's the best." Interestingly, fees and returns were also mentioned by those who were less likely to recommend: "Fees are too expensive," "Has not grown much," "It's not an easy system to change where your funds are invested," "No interaction in past six years with ï ¿ ½broker'," "Not confident that the investments in the plans are managed correctly," "Website is cumbersome." There were also many comments by respondents that suggest that even among those using 529 plans, there is relatively low awareness and understanding of these vehicles and their benefits: "I am not savvy enough to know if this is the best option for saving" "Confusing" "Really I have no idea what I am doingï ¿ ½I am just throwing money at [a] plan that pays for tuition but I have no idea if or how the plan hurts my ability to get financial aid." "I've gotten a pretty good ROI during the 10 years I've been in the plan, but don't know if the ROI I have gotten is good, so-so, or bad." "Wellï ¿ ½we think it's working out pretty good for us, though I don't really know whether it is or not. It what our financial planner recommended." "ï ¿ ½have not been following as closely as I intend to from this point forward" "Nothing to compare it to" These comments are not specific to a particular plan, but indicative of a broader sense of consumer confusion and uncertainty about 529 plans, and points to an opportunity for better ongoing outreach and education by plans with existing account holders. Intro: According to Sallie Mae's How America Saves for College 2015, 27% of American families saving for college are using 529 plans. But how happy are they with their plans? In 2015, Savingforcollege.com surveyed 294 readers who were using 529 plans to save for college and used the Net Promoter Score methodology to gauge their satisfaction with those plans. Net Promoter Score You may not be familiar with the Net Promoter Score (NPS), but you've probably been asked to respond to an NPS survey. This simple one-question survey asks respondents how likely they are to recommend a brand, product or service to their family and friends using a 0 to 10 scale, where 10 is very likely, and then asks for feedback on why they chose their score. Frederick Reichheld first introduced the concept in a 2003 Harvard Business Review article, where he explained that his research indicated that this single question was a strong predictor of customer loyalty and company growth. Since that time, NPS has been adapted as a key metric by numerous organizations large and small. Here's how it works. Responses of 9 or 10 are considered Promoters; responses of 7 or 8 are Passives; and responses of 0 to 6 are Detractors. To calculate the NPS score, the percentage of Detractors is subtracted from the percentage of Promoters. The scores can be compared to those of competitors or to industry benchmarks to see how a company is doing, and it can be monitored over time to measure improvement. Our Results Respondents to Savingforcollege.com's 529 Plan NPS Survey were using a wide range of 529 plans from across the country, so these results are not specific to a particular plan but may provide insights for the industry as a whole. 42.0% were Promoters, i.e., they were very likely to recommend their plan to a friend as measured by a response of 9 or 10. But 31.4% were Detractors, meaning they responded with a 6 or less to indicate their likelihood to recommend. So the NPS score for 529 plans overall was 10.6. What does this mean? Is this a good score or a bad score? A positive NPS means that 529 plans have more Promoters than Detractors, but in this case there is certainly room to improve. The website NPSbenchmarks.com provides a benchmark NPS score for the Financial Services sector of 35.09 (based on 59 companies). Among the companies included in this benchmark score, individual scores range from 92.25 to -41. Fees and returns were among the positives cited by respondents about their plans when explaining why they'd recommend. Other reasons given were: "Easy to set up and contribute," "Low expenses," "Excellent returns," "Integration with Upromise," "Good variety of investment options," and "It's the best." Interestingly, fees and returns were also mentioned by those who were less likely to recommend: "Fees are too expensive," "Has not grown much," "It's not an easy system to change where your funds are invested," "No interaction in past six years with ï ¿ ½broker'," "Not confident that the investments in the plans are managed correctly," "Website is cumbersome." There were also many comments by respondents that suggest that even among those using 529 plans, there is relatively low awareness and understanding of these vehicles and their benefits: "I am not savvy enough to know if this is the best option for saving" "Confusing" "Really I have no idea what I am doingï ¿ ½I am just throwing money at [a] plan that pays for tuition but I have no idea if or how the plan hurts my ability to get financial aid." "I've gotten a pretty good ROI during the 10 years I've been in the plan, but don't know if the ROI I have gotten is good, so-so, or bad." "Wellï ¿ ½we think it's working out pretty good for us, though I don't really know whether it is or not. It what our financial planner recommended." "ï ¿ ½have not been following as closely as I intend to from this point forward" "Nothing to compare it to" These comments are not specific to a particular plan, but indicative of a broader sense of consumer confusion and uncertainty about 529 plans, and points to an opportunity for better ongoing outreach and education by plans with existing account holders.