Taxes A Top Concern Of Advisors And Clients, Nationwide Survey Shows

As lawmakers in Washington debate new proposals for taxing wealth transfer, capital gains and the income of top earners, tax policy remains a top concern for advisors, financial professionals and the clients they serve, according to Nationwide’s latest survey about the impact of the administration’s proposed policies.

Nearly three-fourths (72%) of advisors and financial professionals are very concerned about tax increases over the next 4 years, while 17% are somewhat concerned. Only 8% say they are not very concerned and just 2% say they’re not at all concerned.

“Right now, tax policy is top of mind for advisors, financial professionals and the clients they serve. They’re clearly concerned about taxes affecting their portfolios—and it’s impacting their approach to investing,” said Eric Henderson, president, Nationwide Annuity, at Nationwide Financial. “In fact, taxes have consistently been a top financial concern of investors year over year—especially the High Net Worth and Ultra High Net Worth—according to Nationwide’s annual Advisor Authority Study. Working with an advisor can help clients enhance their long-term financial outcomes through a holistic approach to planning and investing for greater tax-efficiency.”

Taxes No. 1 Concern For Clients

Nearly three fourths (74%) of advisors and financial professionals said tax policy is their clients’ No. 1 concern, among the new administration’s proposed policies. They rated clients’ concerns about all other polices in the single digits, including pandemic relief (9%), health care policy (4%), immigration policy (4%), climate change/green energy policy (3%).

Likewise, when considering the potential effects of the new administration’s proposed policies, advisors and financial professionals said that their clients’ three biggest financial concerns over the next 12 months, will be taxes (59%), protecting assets (51%) and managing volatility (39%). Taxes far outpaced clients’ other concerns, including generating reliable income during retirement (28%), rising interest rates (20%) and inflation, cost of healthcare and saving enough for retirement (tied at 19%). In fact, nearly two-thirds of Americans (60%) expect their taxes to increase in the next four years, according to the recent 2021 Nationwide Retirement Institute Tax-Efficient Retirement Income Survey.

Taxes Top Factor Impacting Portfolios And Investing

Nearly nine in ten (88%) advisors and financial professionals said that their clients want to discuss the impact of tax policy on their investments and financial plans. Clients’ interest in discussing the impact of taxes significantly exceeds all other proposed policies, including immigration policy (44%), climate change/green energy policy (42%), pandemic relief (38%) and health care policy (36%).

Asked to choose the single most important macro issue that will adversely impact their clients’ portfolios over the next 12 months, advisors and financial professionals rated taxes first (32%), with US Federal Budget Deficit a distant second (12%), while ongoing volatility and the COVID-19 pandemic tied for third (11%). The impact of gridlock in Washington (9%), inflation (8%) and a range of other factors were all rated in the single digits.

Advisors and financial professionals also said say tax policy (53%) will be the No. 1 trend that will impact their approach to investing, with domestic economic performance and political/social discord in the US tied for a distant second (30%) and inflation third (27%). Because of the impact of the new administration’s proposed policies, one-third of advisors and financial professionals (33%) say they’ll invest more conservatively in 2021, and 10% say they’ll invest more aggressively. While 44% say they’ll invest about the same, another 10% say the administration’s policy will not impact how they invest.

Concerns About Market, Economy And Advisory Practice

While many positive factors driving markets remain in place, including vaccine optimism, the economic reopening and accelerating earnings, most advisors and financial professionals are concerned that the impact of new administration’s proposed policies could lead to a US bear market over the next 12 months, with 21% very concerned and 40% somewhat concerned. Only 30% say they are not very concerned and just 9% are not at all concerned.

Likewise, while many experts suggest that a booming recovery is gaining momentum, most advisors and financial professionals are concerned that the impact of new administration’s proposed policies could lead to a US economic recession over the next 12 months, with 20% very concerned and 40% somewhat concerned. Only 31% say they are not very concerned and just 10% say they’re not at all concerned.

Additionally, most advisors and financial professionals believe the new administration’s proposed regulatory changes to the financial services industry will negatively impact their practice over the next 4 years. In fact, 31% say it will have a very negative impact and 41% say it will have a somewhat negative impact. Only 19% say it will have no impact, while 6% say it will have a somewhat positive impact and just 3% say it will have a very positive impact.

When asked what one thing they’d want to know with absolute certainty over the next 4 years, advisors and financial professionals said US equity market performance (39%) far outranks all other options. US economic performance (19%) was a distant second and the trajectory and timing of the resolution of the pandemic (14%) was third.

 

Survey Methodology:

This Washington Impact Survey of more than 200 advisors and financial professionals was conducted online by Nationwide, March 2021 – May 2021.