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Rekindling Equity Enthusiasm; Optimizing Annuity Options: March Research—Slideshow

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The March issue of Research magazine looks at some key issues facing a fast-changing advisory industry.

“Stocks: A Hard Sell,” the cover story by Ellen Uzelac, details how client enthusiasm for equities has taken a hit in recent years, and how advisors are responding to this trend. Recent indications of renewed client interest are discussed as well.

“A Steeper Tax Landscape,” by Jane Wollman Rusoff, assesses the impact of new tax laws on high-income clients, and what strategies are suited for this environment.

The Annuity Analytics column, by York University’s Prof. Moshe Milevsky, offers eye-opening advice on how to make the most of guaranteed living benefits in annuity contracts. Meanwhile, in the latest Finke on Finance feature, Prof. Michael Finke of Texas Tech University discusses what new research is revealing about differences between men and women regarding risk tolerance.

This month’s Political Monitor column, by Senior Editor Kenneth Silber, focuses on how skewed perceptions, described by metaphors involving bubbles, pose dangers in markets and politics alike. Silber assembles polling data on how financial advisors and institutions are perceived by the public as a way to help advisors look beyond a possible “Wall Street bubble.”

Click through the following slides to preview the March issue of Research.

Stocks: A Hard Sell

In the March cover story, Contributing Editor Ellen Uzelac discusses how advisors are responding to changed client attitudes on stock ownership. Excerpt:

Back in January, advisor Jeffrey Smith received an email from a relatively new client who was worried about how the debt ceiling negotiations and potential government shutdown might affect her portfolio. Smith’s response was swift—and pre-emptive. He scheduled a face-to-face meeting for the next day and dispatched to all clients a letter he hoped would build a “sound and proper perspective” as events unfolded in Washington.

In closing, Smith, who heads North Shore Investment Consulting in Wilmette, Ill., cautioned: “Again, the media is going to have a field day with this. Try not to let it jar you. Should volatility emerge, throw a hard shoulder toward it. Portfolios need not, and should not, be de-risked as this event approaches.”

Read the full article.

Turn on Your Living Benefit, Now

Prof. Moshe Milevsky offers some advice on the complex task of optimizing variable annuity options. Excerpt:

I am frequently asked by financial advisors whether clients should “hurry up”—in light of the declining richness of guaranteed living benefit (GLB) riders—and add money to variable annuities (VAs) they already own, before it is too late and they are closed to new contributions.

To be honest, I too, have been wondering about the same with my own VA policy, rich in riders, which I fortunately purchased a few years ago. Although my particular policy and its unique inflation-adjusted income riders aren’t available for sale anymore, I do have the option to add funds.

Read the full article.

A Steeper Tax Landscape

Contributing Editor Jane Wollman Rusoff surveys the changed tax scene. Excerpt:

Beatle George Harrison was so burned up over the U.K.’s whopping 95% income tax rate the top-bracket Fab Four were paying that, in a fit of pique, he penned a song about it, “Taxman”: “If you drive a car, I’ll tax the street/ If you try to sit, I’ll tax your seat/ If you get too cold, I’ll tax the heat/ If you take a walk, I’ll tax your feet.”

Super-affluent clients won’t be similarly distressed by increases the American Taxpayer Relief Act of 2012 (ATRA) has brought—provided financial advisors use smart strategies to shelter and protect their income and assets.

Read the full article.

How Much Risk Do Women Want?

Prof. Michael Finke, contributing editor, analyzes recent research on risk tolerance. Excerpt:

Women are obviously less willing to take investment risks than men, right? A seminal study by professors Brad Barber and Terrance Odean famously found that men trade more aggressively than women within brokerage accounts. Other early studies found that women prefer safer portfolios in their defined contribution plans. The perception of the fairer sex as less willing to suffer the cruel volatility of a stock-laden portfolio fits well with common beliefs about the differences between men and women.

But there may be more to this story. Women and men are different, but not just biologically different. Women in older cohorts were less likely to go to college, many interrupted their working lives to raise children, and others chose not to assume responsibility for managing household investments.

Read the full article.

Who’s Kidding Whom?

Senior Editor Kenneth Silber considers the perils of being insulated from disagreeable data. Excerpt:

Many in the financial sector, including financial advisors, were blindsided by the rise of Occupy Wall Street. One reason for this may be that, if you work in finance and spend much time in financial circles (or with clients who tend to be satisfied with your performance), it is easy to misread broader public opinion about finance—and in particular, to underestimate popular dislike and distrust of the sector.

As an antidote to such a possible bubble, let me cite a few poll numbers. A June 2012 Gallup poll found that Americans’ confidence in banks had fallen to a record low, with only 21% saying they had “a great deal” or “quite a lot” of confidence in banks, while 35% said they had “very little” or “none.”

Read the full article.

See the contents of the March issue.


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