From time to time, the overlap between financial planning and college planning becomes unavoidable. With my practice, I interact with financial advisors, wealth managers, CPAs, and just about every alphabet soup letter you can think of. Many times, when these other planners properly review our strategies, they endorse and agree with implementing our plan. Other planners, unfortunately, take an exclusive approach and refuse to review our plans or strategies. Worse yet, they may even recommend an alternative that is neither effective nor legal. The bottom line is that some planners just don’t want to give-up control of their client’s assets whether it’s in the client’s best interest or not.
During some of these interactions, I always wondered if planners just recommended to their clients to simply not disclose any finances that can hurt their financial aid. I always hoped that this was not the case knowing that many of these planners have an obligation to not break the law and have a fiduciary responsibility to their clients. My suspicions were confirmed last week during a consultation with a potential client. This particular client was an investment specialist with a very well-known national company. I bet you’ve probably seen some of their Super Bowl commercials.
This individual admitted that he failed to disclose over $120,000 in assets on the FAFSA in hopes that he would get more aid. It worked, but he broke the law. His student received close to $200,000 in grants from the college. He had made this decision after consulting with his financial planner. This particular planner was also from another very well known national group of financial advisors. They air Super Bowl commercials too and even have a celebrity spokesperson. During this conversation, I could tell that this person knew the omission of these assets was wrong and possibly against the law.
I started to think; where else does this investment specialist and his financial planner cut legal corners or where else do they bend the rules with their clients? There is a right way to do things and a wrong way. There are legitimate, legal, and ethical ways to arrange a family’s finances to make them more aid eligible, but lying on the FAFSA is where many reputable college planners draw the line.
To be clear, you never want to lie on the FAFSA. It is a government form and it is fraud, plain and simple. If you are caught lying on the FAFSA, you can face a combination of up to $20,000 in fines and 5 years of jail time. You can also forfeit any aid for your student and get them expelled from the college. Here is a recent article on a parent that was caught lying on the FAFSA so his student could save money at Harvard.
Just don’t do it. If you feel that your advisor is making a recommendation that isn’t right, feel free to contact us. At the very least, get a second opinion from another advisor that you trust.