NASD investigates 529 plan fund sales

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The National Association of Securities Dealers (NASD) has targeted six large undisclosed securities firms in a new investigation into their 529 college-saving plans sales. While there are a few valid reasons why some investors may opt for out-of-state 529 plans, such plan holders forego the state tax deductibility of their plan contributions -- a key benefit to 529 college saving plan participation. The NASD cited statistics such as over 90% of funds coming from out-of-state residents as a key reason for launching its current investigation.

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This could be another black eye for Wall Street right on the heels of the recent mutual fund scandals. The NASD's concern, and our concern as well, is that these unnamed securities firms may not have advised their clients about the criteria necessary to select the best plans for them (read: the clients and not the securities firms).

There is great variance in the annual costs and commissions charged by the various Wall Street firms, so shop around and do your homework before opening a plan.