With four more years of the Obama administration ahead, members of the financial advisory industry share their perspectives on what the win means for the industry and the clients they serve.
Mag Black Scott, president and chief executive officer, Beverly Hills Wealth Management wrote:
As anticipated, President Obama was given a mandate for four more years. For the financial advisor it means an absolute check on profit taking in positions to take advantage of the 15% capital gains rate that is sure to increase in 2013, possibly to triple per comments made by the President. We can expect the health care industry to be a favored segment as extending coverage to more people as part of Obamacares reforms will bring in many more participants. Green energy and renewable sources receives a boost, and the coal and fracking industries are probably candidates for taking money off the table. Until the debt picture is more clear, equities continue to carry an edge over bonds. The President will continue to focus on addressing the disparities in the nations haves and have nots, having received the mandate of the people.
Bill Keen, managing director of investments, Keen Wealth Management of Wells Fargo Advisors offered his comments on Obamas re-election:
There are two things to think about; what do clients need to do now, what actions should they take, and then, how does it make them feel? When it comes to how it makes them feel, our clients are relieved that all of the negativity and distraction of the election is behind them.
Then there's the question, what are you going to do about it? This is a status quo election. Were pretty certain tax rates are not going down, theyre probably going up. A lot of our clients are retired and withdrawing funds from their IRAs which is taxed as ordinary income. If the Bush tax cuts are allowed to expire on December 31st, the 10% tax bracket will disappear, and the rates for the remaining brackets will increase. It wont be a huge drain on their cash flow, but it could certainly affect what pool of assets they take money from. You have to be really cognizant of how the tax brackets will weigh on each source and where clients want to spend money from, which we talk about with the clients and their CPAs. We also think interest rates will stay low which affects clients pensions and some distribution calculations.
Michael Fein, managing partner, CIC Wealth Management shared his perspective on the outcome:
Everything that we were seeing on the client side, was clients calling up with one side; the worlds coming to an end with Europe, the fiscal cliff, and all these bad things. But for every bad thing, theres a good thing. In conversations with clients I said to them, just remember that major corporations right now are sitting on unprecedented levels of cash.
As long as the fiscal cliff gets sorted out sooner than later, which I think it will, it gives us an opportunity to step back and say, we have to solve these problems. I think the pressure will be there and Im kind of optimistic. Companies that do well in any environment still exist, and well be looking more so on the defensive, necessity type stocks. The focus for us going forward is finding well run companies and we are going to look more at U.S.-based, some multinational companies. On the debt side, we dont have any treasuries, and we havent for a while, I think the treasury market is a horrible place to be. One of the places weve been looking at is emerging debt, both corporate and sovereign debt. But if the U.S. doesnt get its act together on the fiscal cliff sooner rather than later, we will see a downgrade and that pressure will not help a very sluggish macro-environment.
Dale Brown, president and chief executive officer of the Financial Services Institute, which has been sharply critical of the Obama administration, shared FSIs response to the election outcome in a statement:
The American people have spoken and we congratulate President Obama on his reelection. We urge the president to carefully consider the closeness of the election results as he evaluates his regulatory policy priorities for a second term. Clients and their independent financial advisors and financial services firms need a healthier, more business friendly regulatory environment. The next 13 months are critical for our members because, come January 2013, Congress will be back in re-election mode and will not tackle anything that could put their own re-elects in jeopardy. As Washington shifts its collective attention to the fiscal cliff and tax reform, we must remain vigilant in our advocacy efforts. FSIs influence in Washington, D.C. and in the states is strong and growing and we have many advocates in elected and regulatory positions who understand our needs and our importance to hard-working American investors. Lets get to work.
Charlie Smith, principal and chief investment officer at Fort Pitt Capital Group, wrote:
Since the FA community is not homogeneous, it means different things for different people. Number one issue for those who are not registered investment advisors is our expectation that the Obama administration will continue to try to make brokers subject to the fiduciary rule. This change would obviously run counter to some of the basic distributive functions of investment banking/brokerage firms, so it will continue to generate friction between the administration and the brokerage community. This will also drive continued growth in RIAs.
Potential changes and policy issues for existing RIAs are less likely, though increased resources at the SEC may make examinations more frequent or more onerous.
For clients, I think greater clarity with regard to the contrasting motivations, compensation and basic business models of advisors vs. brokers is likely, and this would be a positive.