Report downgrades college savings plan
An investment research firm has downgraded Maine's $5.3 billion NextGen college savings plan, operated by Merrill Lynch, though the Finance Authority of Maine says the move has little meaning.
Chicago-based Morningstar cited regulatory issues surrounding how Merrill advisers sold the plan for its decision to downgrade it two notches from "above average" to "below average" in its annual 529 educational savings plan ratings report released Thursday, according to Reuters. The report studied 58 plans that manage more than 95% of the nation's $133 billion 529 plan market. In January, the Financial Industry Regulatory Authority fined Merrill Lynch $500,000 for a lack of proper supervision over how its representatives sold the Maine plan. FINRA found that advisers failed to discuss with investors who were sold the NextGen plan tax benefits that were available, which Merrill Lynch has worked to correct. Morningstar also found that the NextGen plan's fees are higher than the average adviser-sold plan.
Beth Bordowitz, CEO of FAME, which administers the NextGen plan, told the Bangor Daily News the downgraded rating "means nothing, practically," and that FAME does not put much stock in Morningstar's review because it's a for-profit organization. Maine Treasurer Bruce Poliquin also echoed Bordowitz's sentiments, saying it's unclear how Morningstar devises its ratings.
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