Advisers are of two minds following yesterday’s Democratic sweep of the White House and Congress.
Some worry about the effect of potentially large tax increases, while others are hopeful that President-elect Barack Obama can instill confidence in the economy. All are thinking about what the new administration will mean in terms of their clients’ finances.
“Regardless of the rhetoric, it almost certainly means taxes are going to go up for everybody,” said Michael Jones, a certified financial planner, chartered financial consultant, and president of Lifetime Financial Solutions Inc. of Louisville, Ky., which manages about $30 million. He is a member of the government relations committee of the Denver-based Financial Planning Association, but he spoke for himself.
Taxes are likely to be increased on a wide range of middle-income households, he believes. Of particular concern to him is the fact that future shortfalls for Social Security and the federal budget deficit have not been addressed.
“If you go to a more liberal economic policy, the only solution is you’ve got is to radically increase taxes to provide any other additional government programs or benefits,” Mr. Jones said.
But Michael Marvin, a CFP, views the election as a “net positive.” He, also is a member of FPA’s government relations committee who spoke on his own behalf. Mr. Marvin has also been chief of staff to former Rep. Silvio Conte, R-Mass., who was the ranking member of the House Appropriations Committee in the 1980s.
According to some exit polls, Mr. Obama won decisively even among voters with household incomes above $200,000 a year, said Mr. Marvin, principal of TAMFinancial LLC in Annapolis, Md., which manages about $20 million.
“I think Americans are saying taxes may be important, but they’re not the be-all and end-all,” he said. “Very few of my clients are afraid of the idea of returning to the economic growth and budget surpluses that we saw in the 1990s,” under President Clinton, who raised taxes on upper-income taxpayers.
Mr. Obama campaigned on cutting middle-class taxes while raising taxes on households with incomes above $250,000 a year.
The task for the president-elect “is instilling confidence that our financial system is vibrant,” Mr. Marvin said.
“He should use the bully pulpit-elect soon,” perhaps at the upcoming economic conference of European and U.S. leaders scheduled in Washington next week, he said.
Keith Newcomb, sole proprietor of Full Life Financial LLC in Nashville, Tenn., believes it is incumbent on advisers to “pay attention to tax management strategies for our clients as we get into yearend.” He is also an FPA government relations committee member who primarily does hourly financial planning for clients managing retirement assets. He was speaking on his own behalf.
One strategy advisers can use is to book unrealized losses this year, which could be a valuable asset for taxpayers to have in the future, he said.
Tax swaps — replacing an investment that has lost value with a similar investment — could also be used as long as they do not run afoul of tax regulations against wash sales, Mr. Newcomb added.
Brent Brodeski, managing director of Savant Capital Management Inc. in Rockford, Ill., cites studies over the past century showing mixed stock market results, regardless of whether free market economies are led by progressive liberals or more conservative free market leaders.
Savant Capital Management, a member of the Zero Alpha Group of fee-only passive-management advisers, manages about $1.3 billion.
“When you look at history, more conservative or pro-business, versus more socialistic types of presidents or policies, has very little to do with stock market returns,” he said.
European blue chip stocks have performed as well as U.S. Standard & Poors stock index issues going back to 1970, he said, “even though Europe has been more socialistic and the U.S. has been more capitalistic.”
For the complete report, see the upcoming Nov. 10 issue of InvestmentNews.
No comments:
Post a Comment