Updated Wednesday, April 23, 2014 as of 9:11 PM ET
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6 Things Advisors Need to Know: Expect Higher Correlations; Use Tax-Advantaged Investments
SourceMedia
Tuesday, April 16, 2013
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Advisors are busy this week with questions and concerns from clients about gold in free-fall, negative numbers coming out of China, tax-advantaged investments, and more.

WATCH FOR HIGHER CORRELATIONS

“With gold in free-fall and negative numbers coming out of China and the U.S. consumer, advisors should be cognizant of increasing correlations between asset classes, specifically, emerging markets and commodities (including gold). If liquidity begins to flow out of risk assets, opportunistic credit strategies, such as high yield and emerging market debt, will also most likely take a hit.”

--Duncan Rolph, managing director of Miracle Mile Advisors

TAX ADVANTAGED INVESTING

“We are seeing more questions from advisors with a renewed focus on tax advantaged investing as a result of tax season and the changes in tax laws. There is an increased focus on variable annuities, not for their living or death benefit features, but for tax deferral available through annuities. Lower cost annuities, specifically focused on tax deferral, are seeing greater popularity as advisors look for ways to help their clients control their taxable income and investments and mitigate the impact of the rising tax environment we are now in. We are seeing an increase in our variable annuity sales and an increase in the size of the contracts purchased as advisors help their clients with tax savings and control.”

--Ann Hughes, vice president of Sammons Retirement Solutions

STICK TO YOUR GUNS

“Many of our clients are wondering why their portfolios are not up more given the recent gains in domestic equities. Remember to give wise council and not have a ‘go with the flow’ attitude, and add equities to the portfolio. The economy is indeed improving but this rally is, to some extent, Fed-induced with plenty of risks abounding. The issues in Europe are far from over as the problem in Cypress illustrates. Many countries are manipulating their currencies, debt abounds and geopolitical problems are rising affecting the overall health of the economy. Stick to your guns and stay well diversified.”

--Michael Conway, president of Conway Wealth Group

TAXES vs. RISK

“We all know that risk and reward are related and it’s important to optimize asset allocation to bring portfolio risk into balance with return; but I think it’s equally or even more important moving forward to minimize the taxation of investment earnings for clients. In this ultra-low interest rate environment, advisors who are paying attention to the art of controlling taxes potentially stand a significant chance to increase their clients' real-world portfolio return and do so without producing any increase in risk. The next time the opportunity presents itself to add ETFs, tax managed mutual funds, and muni bonds to your clients’ taxable accounts; and high yielding mutual funds, high dividend and growth funds to their qualified accounts, don't forget about CDA's (contingent deferred annuities), no load or low load animates, as a viable alternative to add value for your own clients.”

--Kimberly Foss, founder of Empyrion Wealth Management

BE CAREFUL WHAT YOU WISH FOR

“Awash in monetary supply, with more on the way, this strategy has been reaffirmed by most central banks globally and recently by The Bank of Japan’s new finance minister. This is one reason why stocks are increasing. The way this is supposed to work, or at least the way the Fed wants it to work, is that low interest rates are supposed to spur economic growth. This policy is supposed to ignite growth, not discourage it. Unfortunately, the exact opposite is occurring. Be careful what you wish for.”

--J.J. Burns of J.J. Burns & Company

CULTIVATING NEXT-GEN

“If you take a look at the demographics, advisors are on average in their mid-late 50s, with 6% under the age of 30. As more than 75 million baby boomers enter retirement many will be looking for the expertise of a financial advisor to help them manage their money and pursue their financial goals. A career in financial planning can be highly satisfying and financially rewarding, offering flexibility, as well the opportunity to make a positive impact on the lives of individuals and families.”

--Tom Nally, president of TD Ameritrade Institutional

EXPLOSION OF INDEPENDENTS

“The independent space has exploded exponentially over the past several years. Today, there are so many more flavors of independence and ways for an advisor to become an independent business owner. Advisors can 'go it alone' and open up their own shop or 'tuck into' an existing practice. There is also the quasi-independent model that affords an advisor the ability to go independent with 'guard rails.' Finally, newer entries into the space such as Focus Financial Partners, HighTower Advisors and Dynasty Financial Partners offer a full complement of product, platform and services that have super charged the independent space.”

Mindy Diamond, president of Diamond Consultants

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