More On Tax Planningfrom The Advisor's Professional Library
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
- Annuities: Variable Annuities Annuities are hot. The tax rules vary with the circumstances. Advisors must be aware of these intricacies when discussing annuities with clients.
If your clients are increasingly worried about the fiscal cliff and its possible fallout, Jefferson National has an answer–alternative investments.
While so-called alternative investment products have received increased attention as a portfolio diversification tool in the wake of the financial crisis in 2008, the Louisville, Ky.-based company announced Thursday that it has expanded its selection of alternative investment options to help overcome “the growing anxiety over the threat of rising taxes.”
Jefferson’s fee-only variable annuity, which is geared to the RIA channel, will now offer the Country Rotation Portfolio and Sector Rotation Portfolio from Innealta Capital as a sub-account option. Innealta is a quantitative asset management firm specializing in the active management of ETF portfolios, and joins AllianceBernstein, Lazard, PIMCO, Mariner Hyman Beck Portfolio and the Vice Fund on the Jefferson platform. With these additions, Jefferson now offers 70 liquid alternatives, including many strategies favored by hedge funds and institutional investors.
“We continue adding more alternative strategies to help advisors manage volatility while improving tax-efficiency,” Laurence Greenberg, president of Jefferson National, said in a statement. “As the threat of the fiscal cliff looms large and taxes are poised to rise, these needs become even more urgent.”
Research from the company indicates that tax-efficiency “is vital to RIAs and fee-based advisors facing plunging markets and rising taxes.”
“This month, the market staged the biggest drop in nearly a year and all indexes were down more than 2%, the worse post-election sell-off since 1948 as investors feared the long term gridlock posed by the fiscal cliff fast approaching on Dec. 31,” the company notes. “If no solution is reached by year-end, the nation’s taxes will escalate by $500 billion, or an average of nearly $3,500 per household, according to the nonpartisan Tax Policy Center. The same study says the top 1% of households would see after-tax income drop by an average of 10.5%.”
It also shows the trend toward greater allocation to alternatives. More than 68% of advisors have increased their use of alternative investments, and more than 61% believe that alternatives will become even more important than traditional investments in the future. Likewise, Cerulli research indicates that in five years the use of alternative strategy funds could increase more than a 245%.
“As the rest of the competition moves to reprice and retool in an ongoing features and benefits battle—or retreat from the industry entirely–Jefferson National will continue building momentum with unique alternatives in a tax-deferred investing solution tailored to meet the needs of RIAs and fee-based advisors,” Greenberg added.