CFRP’s evaluation of the Child Support for College (CS4C) program has helped spur a rule change at the Texas State Securities Board that will help Texas families receive professional assistance when signing up for college savings programs.
One of the barriers encountered by CS4C, an 18-month pilot program designed to incentivize college savings among those in the Texas child support population, was a set of legal restrictions around the type of assistance financial coaches could provide to clients interested in college savings accounts. Regulations enacted by the Texas Securities Act prohibited financial coaches from providing guidance or financial advice to clients unless coaches were officially registered with the State Securities Board –a lengthy process involving extensive background investigations, tests on securities law and principles, compliance with record-keeping and disclosure requirements, and annual renewal.
Because many financial coaches working with disadvantaged populations are employed through community organizations, few are registered as official dealers, agents, or investment advisers. Under the old rule, these coaches were severely restricted in their ability to help clients navigate the complex menu of investment options, leading some clients to forgo college savings accounts altogether.
Recognizing this as a substantial barrier to saving for college, RAISE Texas, one of the primary stakeholders in the CS4C program, began to work with the Texas State Securities Board to draft a new rule allowing financial coaches to assist families and individuals in completing applications for approved college savings programs, such as the Texas 529 plan. In addition, the proposed rule would permit financial coaches to actively provide information on these savings programs to clients. On January 14, 2014 the Texas State Securities Board approved and passed these changes in rule 139.24.
In practice, the rule change provides a registration exemption for charitable organizations and their financial coaches when assisting economically disadvantaged clients with Texas qualified tuition program plans. The new rule represents an important step forward in efforts to facilitate college savings among disadvantaged populations in Texas, and would not have been possible without the commitment of CS4C stakeholders and advocates.
–by Daniel Dillon, Research Associate