Congressional debates over healthcare and budget reform are likely to force equity markets into extreme volatility for the rest of the year, but advisors can take specific steps to protect their clients’ portfolios from the fallout, according to Andy Friedman, a principal of The Washington Update and a political commentator.

The economy could face a "fiscal cliff", or three-percentage point slowdown in GDP if taxes increases increase dramatically, Freidman told a general session at the Raymond James National Conference for Professional Development in Orlando on Tuesday.

To help clients, advisors should encourage them to take advantage of current gifting opportunities, now that individuals can give others cash gifts up to $13,000 tax-free. “We may never see another opportunities to transfer wealth like this again,” Friedman says. “You transfer it in trusts, and someone has to manage it. This is allowing you to hang onto assets after your client passes away.”

Advisors should also discuss selling certain stocks and dissolving concentrated positions, particularly as capital gains taxes are set to rise as the Bush tax cuts expire, Friedman says. Advisors need to consider putting clients’ assets in more stable investments, like municipal bonds, and monitor dividend-paying stocks for negative market effects.

Friedman also gave longer-term advice. As far as retirement planning goes, advisors should consider investments that provide tax deferral and retirement income guarantees.  “Entitlement programs will change,” he says. “Companies have cut back on pension plans, because it is hard for companies to provide retirement income to an aging workforce that is living longer.”

Variable annuities are one way to provide reliable retirement income, he says. Modern policies have features that give policyholders much more control over the underlying mutual fund investments and are designed to provide attractive benefits throughout the holders’ retirement.