news & trends
FINANCIAL PLANNING
Tax Deferral More Important Now
Survey of fee-based advisors reveals likely changes in financial-
planning strategies.
Fee-based advisors have identi- fied five new financial land- marks to help investors weather
economic upheaval, according to a
micro survey that Jefferson National
conducted recently. The landmarks
are: accumulating more assets,
leveraging the benefits of tax deferral,
considering more alternative-asset
classes and investment strategies, employing managed accounts for greater
efficiencies and the rapid growth of
fee-based services.
“As former Fed Chairman Alan
Greenspan stated in late 2008, we are
facing an unprecedented ‘breakdown
of the central pillar of competitive
markets,’” says Laurence Greenberg,
president and CEO of Jefferson National.
“With banks under intense pressure, job-
less rates climbing, the housing market
in disarray and the ongoing liquidity
crisis, investors are turning to advisors
in greater numbers to help them find
new financial landmarks to navigate this
uncharted territory.”
tional says. “Tax-deferral can poten-
tially generate higher after-tax returns
for ‘tax-inefficient’ assets, such as
REITS, bond funds and actively man-
aged stock funds,” Greenberg says.
Of the advisors surveyed, 70 percent
said using more alternative-investment
strategies and noncorrelated assets could
increase diversification. “In today’s
market, many advisors will argue that
the traditional 60/40 equity and fixed-income portfolio is incomplete, and
they work hard to strike a balance that
includes more alternative-asset classes
and tactical asset-management strategies,” Greenberg says.
The use of alternative assets is
on the rise, Jefferson National says.
About $1.8 trillion was in the alternative-investment market at the end
of 2008, and that will likely increase,
Jefferson National says, citing an
April 2009 Cerulli report, Alternative
Investments in the Retail Marketplace:
Evaluating Opportunities and Growth.
Savings and diversity
More than 85 percent of advisors
polled said accumulation is critical
after the recent market downturn.
“Retirement ground rules used to be
simple: Stay with a company, retire at
65, [and] collect a pension and Social
Security,” says Greenberg. “But faced
with a failing retirement safety net,
volatile markets and rising costs, a majority of advisors believe that investors
need new ways to save more.”
Nearly three-fourths (74 percent) of
the advisors said tax deferral is “more
important than ever,” especially in light
of anticipated post-recovery increases
in taxes for high-net-worth individuals
and capital-gains taxes, Jefferson Na-
Growth of managed accounts
Most advisors (79 percent) said the
use of managed accounts will grow as
a way to deliver advice in an efficient
and structured program. Developments in batch trading, modeling and
other smart technology enable advisors to deliver individual customization for the mass market.
“According to many advisors, the
benefits of managed accounts can
include cost efficiency, tax efficiency,
customization and simplified reporting,” Greenberg says.
Consumers are demanding more
unbiased and transparent advice,
which will spur a surge in the growth
of fee-based advisory services, according to 70 percent of the advisors
surveyed. “According to recent studies, [registered investment advisors]
are now bringing in more assets than
wirehouses, fee-based advice is on the
rise and the number of commission-based advisors is declining,” Greenberg says.
According to Cerulli’s 2008
Quantitative Update: Intermediary Markets,
RIA retail assets have reached more
than $1.4 trillion and are growing at
15 percent annually, making them
some of the fastest-growing segments
in the industry, Jefferson National
reports. In addition, Cerulli’s
Quantitative Update: Advisor Metrics 2008
revealed that 65 percent of brokers
said they would like to become independent if they were making a career
change, Jefferson National says.
For this survey, Jefferson National,
which offers retirement products from
fee-based advisors, collected more
than 1,000 responses online between
March and June 2009. For more information, go to www.jeffnat.com.
—Julie Britt
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For more information about financial
planning, go to www.advisortoday.com.
22 ADVISOR TODAY | November 2009
