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Fifth Annual Advisor Authority Study Reveals RIAs and Fee-Based Advisors Less Likely This Year to Say Tax Reform Will Benefit Clients

Louisville, KY — As April 15th approaches, and the reality of the most dramatic tax reform package in nearly three decades becomes clear, the Registered Investment Advisors (RIAs) and fee-based advisors who say that the majority of their clients will benefit from tax reform have declined 10 percentage points—to 69 percent in 2019 from 79 percent in 2018. This is among a preview of results from the fifth annual Advisor Authority Study commissioned by Nationwide Advisory Solutions, formerly known as Jefferson National. Taxes are considered a cause of market volatility by advisors, are rated a top-three financial concern by investors, and both say that taxes will be among the top factors to adversely impact investor portfolios over the next 12 months, according to this latest survey of nearly 1,600 RIAs, fee-based advisors and individual investors conducted online by The Harris Poll.

“When the 2017 Tax Cuts & Jobs Act was passed, the vast majority of RIAs and fee-based advisors anticipated clients’ anxieties and began taking action. But as our latest Advisor Authority study shows, the benefits of tax reform were not as widespread as originally expected, and both advisors and investors continue to say that taxes are a top concern,” said Craig Hawley, Head of Nationwide Advisory Solutions. “Taxes present a prime opportunity for advisors to use new strategies and tech solutions to mitigate the impact on clients—at the same time that they can expand their services and generate more business. By remaining focused on holistic planning and proactive solutions, RIAs and fee-based advisors can serve their clients’ best interests as well as their own.”

Impacts and Increasing Concerns

Investors remain less confident about tax reform, with just 53 percent of all investors in 2019 saying they will benefit as compared to 56 percent of all investors in 2018. One of the biggest shifts in investors was among the Ultra High Net Worth, with those who say they will benefit from tax reform declining nearly 10 percentage points—to 65 percent in 2019 from 74 percent in 2018. To alleviate clients’ anxiety about the impact of tax reform, the vast majority of RIAs and fee-based advisors have been taking action, with 75 percent in 2019 and 79 percent in 2018 saying that they have adapted their approach to tax-advantaged investing in response.

Year-over-year, RIAs and fee-based advisors rate taxes among their clients’ top financial concerns and say that their clients’ level of concern is increasing. RIAs and fee-based advisors say that taxes rose to a number-two concern for clients in 2019, from a number-three concern in 2018, a number-four concern in 2017, and their number-six concern in 2016. Likewise, investors also say that taxes are among their top financial concerns year-over-year and that their level of concern has increased. Investors rated taxes as a number-two financial concern in 2019 and 2018, rising from a number-four concern in 2017 and number-three concern in 2016.

RIAs and fee-based advisors say that taxes are the number-five cause of volatility, and taxes are inexorably tied to portfolio performance, with both advisors and investors alike citing a negative impact. When asked what macro factors will most adversely impact their clients’ portfolios over the next 12 months, RIAs and fee-based advisors rated taxes number-three in 2019 and 2018, rising from number-five in 2017 and 2016.

Investors cited even greater concerns, rating taxes as the number-two macro issue that will adversely impact their portfolio in 2019 and 2016, with taxes rising to the number-one macro issue in 2018 and 2017. Ultra High Net Worth investors rated taxes the number-three macro factor that will most adversely impact their portfolio in 2019, dropping from the number-one macro issue in 2018, 2017 and 2016. Taxes continue to be complex and can be one of the biggest investment expenses a client may face, as much as 40 percent or more when federal and state taxes are combined.

Opportunities and Solutions

Just as they are now less likely to believe that their clients will benefit from tax reform, the RIAs and fee-based advisors who believe that they will benefit from tax reform have also declined nearly 10 percentage points—to 68 percent in 2019 from 77 percent in 2018. But in spite of the challenges, nearly two-thirds of RIAs and fee-based advisors (60%) say that tax reform will provide them with the opportunity to expand their services and generate more business related to tax planning.

The most likely ways that the 2017 Tax Cuts & Jobs Act will impact RIAs and fee-based advisors’ business over the next 12 months include the way they generate retirement income for clients (28%) and the products or solutions advisors use with clients (22%). As a result of the 2017 Tax Cuts & Jobs Act, RIAs and fee-based advisors said that the products they are most likely to use to generate retirement income over the next 12 months include:

  • Fixed income ladder/bond ladder (22%)
  • Variable annuities with living benefits (20%)
  • Qualified longevity annuity contracts (QLACs) (20%)
  • Yield generating ETFs/income generating ETFs (20%)
  • Dividend yielding stocks (19%)

Only 2 in 10 RIAs and fee-based advisors (21%) said that the 2017 Tax Cuts & Jobs Act will not impact their business.

Year-over-year, Advisor Authority shows that adding new technology is important to enhancing profitability and technology can help advisors better serve their clients. One in four advisors believe technology will help them provide more personalized, holistic financial planning over the next 12 months. Year-over-year, tax optimization tools are consistently rated among the top four or five types of technology RIAs and fee-based advisors are interested in integrating into their practice over the next 12 months.

For additional insights on the impact of taxes and tax reform, financial professionals can also download the latest Advisor Authority 2019 infographic at: https://know.nationwideadvisory.com/AdvisorAuthority2019TaxInfographic

The fifth annual Advisor Authority study explores the investing and advising issues confronting RIAs, fee-based advisors and investors—and the innovative techniques that they need to succeed in today’s complex market. It features a special focus on the most successful advisors and the most affluent investors. These initial findings are to be followed by a series of ongoing reports that will be released over the next 12 months.

About Advisor Authority: Methodology

The fifth annual Advisory Authority Survey was conducted online within the United States by The Harris Poll on behalf of Nationwide Advisory Solutions from February 15 – March 4, 2019 among 1,021 financial advisors and 824 investors, ages 18+. Among the 1,021 financial advisors, there were 507 Registered Investment Advisors and 514 Broker/Dealers. Among the 824 investors, there were 205 Mass Affluent (Household Investable Assets of $100,000 to less than $500,000), 205 Emerging High Net Worth ($500,000 to less than $1 Million), 207 High Net Worth ($1 Million to less than $5 Million) and 207 Ultra High Net Worth ($5 Million or more). Advisors are weighted where necessary by employment status and active management to bring them in line with previous years’ profile. Investors are weighted where necessary by age by gender, race/ethnicity, region, education, income, marital status, household size, investable assets and propensity to be online to bring them in line with their actual proportions in the population.

About The Harris Poll

The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 that is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. We work with clients in three primary areas; building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. Our mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more, please visit www.theharrispoll.com.

About Nationwide Advisory Solutions

Nationwide Advisory Solutions, formerly known as Jefferson National, is a recognized innovator with a mission to help RIAs and fee-based advisors build their practice by helping their clients to potentially accumulate more wealth and reach their financial goals. Nationwide Advisory Solutions does this by developing and delivering value-added investment products, services and technologies that dovetail with fiduciary obligations—wrapped in an industry-leading customer experience. To learn more, please visit www.nationwideadvisory.com

About Nationwide

Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by both A.M. Best and Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com. Follow us on Facebook and Twitter.