Where do investors turn for reliable information when trying to figure their 2017 tax returns and plan for next year’s filing under the revised tax code?
Twenty-five percent of investors in a new survey from TD Ameritrade Institutional said their most-trusted source of information was financial advisors — well ahead of TV news, 17%, accountants, 14%, and tax preparation services, 11%.
This is important because 75% of respondents said they were unclear how the new tax law would affect them.
TD Ameritrade Institutional developed its Americans & Taxes: An Individual Investor Survey to understand how U.S. investors view the recently enacted tax law. Koski Research fielded the poll in mid-January among 1,000 U.S. adults with a minimum of $10,000 in investable assets.
“There are plenty of experts offering their views on the new tax code and how investors should respond, yet we find, once again, that investors want advice and guidance from someone they trust, especially in times of uncertainty and change,” Tom Nally, president of TD Ameritrade Institutional, said in a statement.
Investors in the survey had mixed views about how the new tax law would affect the American economy and their households. Forty-one percent said it would benefit the economy, while 35% said it would do the opposite.
At the same time, 35% of respondents expected their take-home pay to increase, but 22% thought their paycheck would be slimmer.
One thing 63% of survey participants agreed on, regardless of income level or investable assets, was that wealthier households would benefit more. Fifty-five percent said “very wealthy people” would benefit most.
TD Ameritrade Institutional said the survey results reinforced its poll of registered investment advisors, published in January, who said the new tax plan would be the top item affecting client portfolios in 2018.
The survey found that most investors in the poll, whether they had a good understanding of the new tax law or a minimal one, planned to take several actions this year to navigate the new tax landscape.
Some will increase their allocations to equities. Thirty percent said they would do this via individual stocks, 23% via stock mutual funds and 15% via stock exchange-traded funds.
Tax-advantaged retirement plans are increasingly attractive. Fifty-seven percent of respondents said they would consider contributing more to retirement accounts, and one in five said they were definitely doing so.
The American Institute of CPAs reported this week that affluent Americans recognize tax efficiency as a crucial aspect of their financial plan.
Love It or Hate It
According to the TD Ameritrade International survey, investors’ mixed attitudes toward the new tax code were closely tied to their political party affiliation, state residence and personal wealth.
Whereas 29% of investors overall purported to “hate” the new tax plan and 22% to “love” it, 49% said they had no strong opinion:
- Independents: 54% neutral; 26% hate; 20% love
- Democrats: 49% neutral; 42% hate; 9% love
- Republicans: 50% neutral; 42% love; 8% hate
Not surprisingly, negative sentiment was stronger, at 40%, among investors who live in high-income, high-tax states — California, Connecticut, Massachusetts, New Jersey and New York.
Similarly, 44% of high-tax state residents said they expected to pay more in taxes, compared with 33% of Americans overall. And 50% of the respondents in these five states believed the new tax law would negatively affect their state, compared with 37% overall.
Thirty-two percent of respondents living in those states said they planned to move to an area of the country with lower taxes, or were considering doing so, versus 24% of the overall sample.
“This survey supports what RIAs have been telling us: Investor demand for financial planning and investment advice has surged because of the new tax plan,” Nally said.
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