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Financial Planning > Tax Planning

Advisors’ 4 Biggest Concerns: Eaton Vance

By Emily Zulz

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Preparing for a possibly imminent rate hike and generating investment income in a low-return environment are among the top concerns of financial advisors and their clients, according to the Eaton Vance’s most recent Advisor Top-of-Mind Index survey.

The quarterly survey, released Tuesday, is part of an ongoing study that measures the overall importance of key issues facing financial advisors and their clients.

“One of the, in my opinion, long-term best ways to add value as a financial advisor is making sure you are managing to the needs of the client [and] addressing some of these issues,” said John Moninger, managing director of retail sales at Eaton Vance, during a visit to ThinkAdvisor’s New York office. “But also you’re making sure that client is keeping as much of that return in their pocket through tax minimization strategies.”

The study surveyed 1,006 financial advisors from around the country, representing a cross section of advisors including independent, wirehouse and private bank advisors. The survey was conducted online from June 18 through July 10.

According to Eaton Vance’s survey of financial advisors, these are the four concerns on the top of advisors’ minds:

Anxiety over rising interest rates

1. Anxiety Over Rising Rates

 According to the survey, nearly three-quarters of advisors report at least some concern about a near-term increase in rates, and 1 in 5 say they are very concerned.

“When asked, though, when do you think rates are going to go up, [there’s] a little bit of a disconnect from what we saw the market pundits or even the media talking about,” Moninger told ThinkAdvisor. “Roughly 42% of the advisors indicated that they thought it would be the first half of ’16, not necessarily September or even later on in the year.”

Moninger says this is especially interesting as the survey was conducted in July before the market’s recent turmoil.

Another 38% of advisors expect a move will come in the second half of 2015, according to the survey.

As Fed action possibly looms, many advisors are already taking measures to prepare their clients for rising interest rates. According to the survey, 34% of the advisors have already taken action.

Meanwhile, another 47% are taking their time. According to the survey, these advisors report they are currently in the process of adjusting portfolios on their clients’ behalf.

“And it kind of makes sense,” Moninger said. “If you go back to ’13 … we believed in the market that rates had the potential in ’13 to go up; they never did. Advisors are a little more skeptical this time.”

Opportunity in volatility

2. Opportunity in Volatility

While volatility is top of mind for most advisors, the survey finds that advisors’ clients are split on how they view the ups and downs of the market.

The survey reports that 56% of advisors say their clients see volatility as a risk, while 44% see it as an opportunity.

 “I thought it was pretty interesting, though, [that] 44% think of volatility as an opportunity,” Moninger told ThinkAdvisor. “They’re looking for it. They’re waiting for it to become a catalyst by which they actually deploy more money into the market or they move cash off the sideline or some of those activities as well.”

Interestingly, Moninger says, more people are seeing risk as opportunity compared with previous studies.

In the May survey, 61% said they saw volatility as a risk, while 39% saw it as an opportunity. 

“Volatility always lurks, but how investors are preparing for and managing volatility is what really matters,” Moninger said earlier in a statement. “It starts with having a plan to address the effects of volatility on a portfolio and harnessing the opportunity it may create to influence long-term goals.” Searching for income

3. Searching for Income

Advisors’ concerns over income rose in this quarter’s survey.

Nearly half (49%) of the advisors surveyed say generating income from investments increased in importance over the past six months.

This increase has been driven in part by the perception that fixed income markets are at their peak and may be poised for a correction, according to the survey.  

Tax minimization strategies

4. Tax minimization strategies

“Although advisors don’t say [reducing taxes] is their number one issue, their activity indicates they’re changing what they do,” Moninger told ThinkAdvisor. “Historically what’d you see is advisors would take action in filing around the April timeframe to deal with the taxes from that prior year … then inevitably you see this ramp up in activity in the fourth quarter, which is usually they’re selling off, harvesting losses at the last minute to create some minimization strategy for the client.”

According to this quarter’s survey, Moninger said there is a shift showing that tax strategies are becoming more of an issue throughout the year.

“It’s not just a twice a year thing,” Moninger said. “More and more we’re seeing advisors – and this showed up in our survey – they’re taking action throughout the year.”

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