More On Tax Planningfrom The Advisor's Professional Library
- Annuities: Estate Tax The value of certain types of annuities may be included in an estate’s value. Understanding the intricacies of these inclusions is a critically important aspect of estate planning.
- Taxation of Real Estate Real estate may be used to shelter income and may offer certain tax benefits. However, the type of real estate investment may result in different tax treatment. Learn how to use these investments to help your clients.
A survey of more than 2,000 advisors by the Denver-based managed account provider Curian Capital found that more advisors are optimistic about the economy when compared with previous years, but are concerned with rising interest rates and tax burdens.
The “Curian Advisor Survey: 2013 Outlook for Advisor Priorities” found a “wide swing” over last year in the overall strength and direction of the economy, Mark Schoenbeck (right), Curian’s senior vice president of marketing, told AdvisorOne on Wednesday.
“We’ve had four years of positive stock market returns, and it only took four years for advisor sentiment to catch up,” he said.
However, Schoenbeck added that 95% of respondents were either “moderately or very concerned” about rising interest rates and their effect on their clients’ fixed-income allocations.
“To have 95% of advisors say yes to anything means it is a major concern,” he said.
Additionally, the survey, now in its sixth year, found only 6% of respondents use social media to gain new leads, which appeared to shed light on recent debate about whether the medium should be considered a marketing tool or a distribution channel.
“Part of this is the regulatory environment catching up with the technology,” Schoenbeck said. “We’re now starting to get guidance, as an industry, so those numbers should soon rise. I was just at a conference where one presenter noted that IT budgets specifically dedicated to social media marketing will soon eclipse IT budgets over all. “
Moving to product selection, the survey found 87% of advisors think the tax-efficiency or after-tax performance of their clients’ portfolio is important, which Schoenbeck noted “is a little higher than normal.”
“It fits, somewhat selfishly, with what we’re doing as a firm from a strategic standpoint,” he explained. “A big part of message focuses on fixed income and tax efficiency.”
Alternative investments are another focus for the firm, as well as parent company Jackson National Life. While more than 30% of advisors said they currently had 10% or more of their assets under management allocated to alternative asset classes, more than 31% of respondents said they planned to increase their use of alternative investments by 5% to 10% this year.
Key findings of the survey include:
While advisors were divided about their outlook on the financial crisis in the 2012 survey, respondents are now overwhelmingly positive. Nearly 54% of advisors reported they believe the economy will get better over the next year. Only one-fifth of respondents reported they believe the economic crisis will be long term. Unemployment topped the list of the economic issues that advisors believe are the biggest threats to their clients’ wealth management plans at 23%, followed by government spending at 20%; 30% of respondents reported their clients also feel unemployment is the highest perceived threat to their retirement accounts, followed by market volatility at 14%.
Product selection and investment strategies
“Even as advisors become more confident in the stability of the economy, they are now faced with the aftermath of several turbulent years,” said Chris Rosato, senior vice president of strategic development for Curian, in statement announcing the survey’s release. “Advisors are challenged to decipher which products and solutions will help to mitigate the challenges facing investors today, including the impact of rising interest rates and taxes, which are primary concerns in planning for their clients’ retirement income needs. Advisors are also increasing their utilization of alternative investments and separately managed accounts, which indicates a desire to diversify portfolios and create customizable solutions for their clients.”
Despite interest rate and tax-efficiency concerns, 63% of advisors said they had access to, and actively used, tools and strategies to reduce the impact of taxes on clients’ investment portfolios. However, more than 28% of respondents said while they had access to such tools and strategies, they did not actively use them.
Advisors ranked separately managed accounts as the product they planned to increase their usage of the most this year, while alternative investments continue to be popular in client portfolios.
Quality technology platforms remain important features to advisors when choosing a solutions provider—more than three-fourths of advisors said they valued the ease of use of the platform and technology as the most valuable service from their advisory solutions provider, closely followed by strong performance history (nearly 68%).
The Curian survey found a majority (56%) of advisors do not use social media within their practices. In addition, only 6% of respondents ranked social media as one of their top three sources of new leads. Apple iPads are the preferred mobile tablet device of more than 50% of advisors, while one-third of advisors don’t use a tablet in their practices. When asked what type of mobile device advisors would like to see from an asset management firm, the response was split, with 49% saying they prefer apps that mimic a firm’s primary website and 46% saying they prefer calculators or tools for business purposes.
“Time management has never been more critical for advisors, as they balance running their practices efficiently and navigating myriad investment choices to meet the needs of their clients,” Schoenbeck said. “It’s clear from the survey that providers need to continue to offer innovative and user-friendly products and technology to help address these concerns and simplify the investing process. The findings also reiterate that to be successful, modern mobile apps need to not only be intuitive and effective, but supported with comprehensive education and guidance tools.”
Check out A Startling Illustration of Globalization’s Investment Impact on AdvisorOne.