Tuition savings programs, or 529 college savings plans, held $166 billion in assets as of the end of 2012, according to a recent Morningstar report. Impressively, assets grew 25% last year, suggesting that 529 plans may be an attractive market for advisors to build their practices.

Yet, pursuing clients presents many challenges. Last year, for example, the average 529 account balance was only $17,174, despite having increased 12% during that year, reports the National Association of State Treasurers.

Furthermore, many 529 accounts clearly have limited shelf lives as the average annual tuition bill for private colleges is close to $30,000. The limited assets and short life spans of the accounts may make it difficult for advisors to profitably focus on the sector, especially when factoring the costs of acquiring new clients and providing ongoing services to existing clients.

In addition, the overall marketplace pales in comparison to the retirement industry, which had $10.5 trillion in IRA and defined contribution assets at the end of 2012. When government plans, private defined benefit plans and annuities are included in that tally, the total grows to an impressive $19.5 trillion.

Even though raising 529 plan assets is challenging, advisors shouldn’t overlook the appeal of the tuition savings market. In fact, college tuition planning—just like retirement planning, risk management and estate planning—is usually an integral aspect of advisory services that many investors seek when turning to financial professionals. Indeed, many adults list sending their children to college and being able to enjoy a financially secure retirement as their primary financial goals.  

At the same time, college tuition has been increasing at a rate that substantially exceeds inflation, making it even more challenging for adults to prepare for their children’s higher education expenses.

Demand among clients for tuition planning services, in and of itself, of course, doesn’t make pursuing 529 plan assets a feasible strategy. Yet, providing the services as an ancillary offering makes sense. Most advisors have clients that will eventually need to start saving for their children’s college tuition. In such instances, providing 529 products is a cost effective way to leverage existing client relationships.

By being able to respond to clients requests for tuition savings help, advisors can tap the 529 market without incurring the costs of prospecting for new clients. At the same time, however, discussing tuition savings strategies as part of overall financial planning can be a powerful way to establish new clients.

Providing the services can also be a defensive strategy. That is, when clients need 529 products, they may turn to other advisors if their current advisors don’t offer the products. Offering 529 products and providing advice on tuition planning can also help advisors establish relationships with their clients’ college-bound children. Those relationships can become meaningful over time when the students graduate from college, enter the workforce and seek financial planning services.

In addition, college graduates who benefited from a financial advisor’s tuition savings advice may be more likely to turn to the advisor for assistance in managing inheritances from their parents or other relatives.  

Yet, simply providing advice on 529 plans may not be enough for strengthening relationships with existing clients who are preparing for the children’s college year. In a competitive marketplace, advisors may need to differentiate their services by helping clients with other aspects of tuition planning, such as applying for government tuition grants, seeking tuition loans and qualifying for scholarships.

As part of the process, advisors may want to form alliances or referral networks with tuition planning specialists who will have detailed knowledge regarding applying for financial aid and loans. The bottom line is that the 529 plan market can be an attractive add-on service for advisors seeking to strengthen their existing client relationships and position themselves for additional business when clients’ adult children need professional assistance with their finances.