RIAs and Fee-Based Advisors Say Tax-Deferred Investing Essential to Navigating Fiscal CliffJefferson National’s New Survey Shows Majority of Advisors Plan to Leverage Tax Deferral to Mitigate Impact of Expected Tax Increases
Louisville, Ky.—December 13, 2012—According to a new survey of Registered Investment Advisors (RIAs) and fee-based advisors conducted by Jefferson National, 75% say their clients are anxious about the impact of the looming fiscal cliff—and their biggest concern is rising taxes. These same advisors say the vast majority of their clients, are demanding tax deferral as a solution to this challenge, topping other potential financial approaches. And advisors agree with their clients, as 85% say that a low-cost tax-deferred investing solution would indeed benefit clients in a time of rising taxes.
“Poised on the brink of the fiscal cliff, the political stalemate that is gripping Washington and driving volatility in the market is clearly a top concern of advisors and their clients, and this is driving an urgent demand for tax-advantaged investing solutions,” said Mitchell H. Caplan, Chief Executive Officer of Jefferson National, a recognized innovator singularly focused on serving RIAs, fee-based advisors and their clients.
Financial advisors are forced to grapple with the threat of rising taxes, as the nation’s tax bill will escalate by $500 billion, or an average of nearly $3,500 per household, if no solution to the fiscal cliff is reached by year-end, according to the nonpartisan Tax Policy Center. Tax-deferred investing vehicles remain an important solution for mitigating this impact and accumulating retirement savings, which is at the core of ensuring adequate income during retirement years.
At the same time, the threat of ongoing volatility is cited as a primary concern by more than 67% of advisors surveyed. Coming on the heels of the 2008 downturn, this unprecedented volatility has made advisors’ jobs more difficult. In response RIAs and fee-based advisors are also increasingly turning to alternative investment strategies to navigate the current market. Often, these strategies are tax-inefficient, which has led 85% of advisors surveyed to indicate that a low-cost tax-deferred investing solution with a broad choice of alternative strategies would benefit clients in a time of rising volatility.
Jefferson National’s research also indicates that tax-efficiency will continue to become increasingly vital to advisors as they continue to allocate more to alternatives in an effort to manage risk and optimize overall portfolio performance. More than 68% of advisors have increased their use of alternative investments, and more than 61% believe that alternatives will become even more important than traditional investments in the future.1 Likewise Cerulli research indicates that in five years the use of alternative strategy funds could increase more than a 245%.2
“As whipsaw markets create chaos for portfolios, and the threat of rising taxes continues to magnify their clients’ anxiety, a clear majority of RIAs and fee-based advisors believe that more alternative strategies and more tax-deferral are needed to meet these challenges head-on,” continued Mr. Caplan.
To meet the unique needs of RIAs and fee-based advisors, Jefferson National’s Monument Advisor, the industry's first flat fee3 variable annuity, now tops a total of 390 funds—9 times more funds than the typical VA4—with the industry’s largest selection of more than 70 alternative investment options, and the most subaccounts with the 5- and 4-star Morningstar Rating™ for four consecutive years.5
More than 250 responses from RIAs and fee-based advisors were recorded in the survey, which was completed December 12, 2012.
1RIAs and Fee-Based Advisors Alternative Investments and Tactical Management Survey, published by Jefferson National, September 2011. 2Quantitative Update: ETFs and Retail Alternative Products and Strategies 2012, Cerulli Associates, 2012. 3Jefferson National’s Monument Advisor has a $20 monthly flat insurance fee. Additional fees ranging from $19.99-$49.99 will be assessed for investors wishing to purchase shares of ultra low-cost funds. See the prospectus for details. 4Morningstar data as of 12/31/11. 5Morningstar data as of 08/15/12 6Jefferson National was reviewed by the Direct Marketing Association, including a panel of independent judges and industry peers, and won for re-engineering the traditional commission-based distribution model and replacing it with an unprecedented web-based direct marketing approach.