Financial advisors are missing an important opportunity if they do not reach out to their clients to talk about pending tax changes and what they may be able to do to mitigate the negative effects, says a Nationwide Financial executive.
Most high-net-worth investors (63 percent) are concerned their investment portfolios will be hurt by upcoming actions in Washington, but most do not plan to talk with their financial advisor or they feel there is nothing they can do about the changes, says a Nationwide Financial survey.
Despite that, nearly all (94 percent) of those who talked with their advisors feel they were somewhat or very helpful in understanding the tax code changes and suggesting portfolio adjustments.
“There is a huge opportunity for advisors to proactively engage clients in a discussion about how tax code changes may impact their portfolio,” says Eric Henderson, senior vice president and leader of the individual products and solutions segment of Nationwide Financial.
The Nationwide survey was taken of 751 investors with $250,000 or more in annual income or investable assets to gauge their opinion of pending tax changes.
More than half (56 percent) feel their individual federal taxes will increase. Nearly half (48 percent) expect tax rates to increase, particularly for the wealthy, and 30 percent think rates will increase across the board.
At the same time, four in 10 say they want more education on the tax advantages of annuities, 21 percent on life insurance and 25 percent on 401(k) plans. Six in 10 are not aware of pending changes in estate and gift tax limitations.
Just over half (55 percent) of respondents have a financial advisor. Most (82 percent) feel somewhat or very comfortable talking to them, and 88 percent are somewhat or very comfortable in their advisor's abilities.
Yet, 60 percent have no plans or are unsure about plans to meet with a financial advisor. Of those who say they will meet with their advisors, many do not plan to do so until next year or until after the tax changes are made.
“It’s clear that clients who are having these conversations with advisors are glad they did,” Henderson says. “This type of proactive counsel can prevent clients from missing out on significant opportunities, while building trust, cementing long-term relationships and opening up sales opportunities.”