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Published in Finance

Wealth managers wish for clarity on federal taxes, stock market sustainability

BY Sunday, December 20, 2020 06:20pm

Wall Street dealt with its share of volatility in 2020, a year with a deep decline at the outset of the pandemic followed by a later rebound. Citing volatility in the stock market over the last few years, some investors have shifted toward safety in managing their money. Susan Vogel-Vanderson, the managing director for Fifth Third Private Bank in West Michigan, hopes the new year brings some certainty to financial markets. A trusts and estates attorney, Vogel-Vanderson also is monitoring what could happen to tax rates in 2021 under the Biden administration, particularly if Democrats take control of the U.S. Senate after the Georgia runoffs.

What is the general mood out there among clients and investors heading into the new year?

It’s been a very interesting year and the market’s been very volatile, particularly in the spring. We’ve had a nice recovery from the dip that occurred in the spring, but there was a lot of reticence on the part of clients to move money out of deposits and into investment management accounts over the course of this year. People were waiting to see what would happen with the election and obviously that wasn’t as clean of a day in terms of results as probably most Americans would have hoped for. People are just starting to seem willing to move some additional assets to the market, but in October and November, clients moved even more money out of investments and into deposits with us. People have just felt uncertain and unsure throughout this environment in 2020.

Susan Vogel-Vanderson, managing director of Fifth Third Private Bank COURTESY PHOTO

Does that move to safety continue in 2021?

I don’t know. There are a couple of different things at play. You have the Georgia (Senate) races that are yet to be decided. Markets tend to favor gridlock in government. Depending on the outcome of that race, we’ll see what happens.

The other thing to really watch — and what we’ve been focused on and working with clients on — is that it’s really important to marry one’s investment strategy with a thoughtful overall wealth plan. We’ve been talking to clients right now more about making sure that they are accelerating income into 2020 because we fully expect that income tax rates are going to increase, again depending on what happens with that senatorial race in Georgia. We’ve been talking about bringing income into 2020, including taking some of the capital gains, because the Biden plan looks like it would raise the rate from 20 to 39.6 percent for individuals with income over $1 million.

 Heading into next year, what advice are you offering to clients?

Each person or family’s situation has to be reviewed independently because everybody has a different circumstance. Some families have really flourished along with the rally and the equity markets in 2020. Others, particularly small business owners, have been hit very hard. We really have encouraged folks to meet with us and their attorneys and CPAs to look at what income can be accelerated into 2020, looking at things like doing a Roth (IRA) conversion, potentially.

What would you like to see the new president and new Congress do in 2021?

Certainty would be great in terms of any upcoming tax changes. I worry about our ability to sustain an economy under higher income tax rates.

What are your hopes for next year?

I hope for continued growth and some sustainability in the stock market.

What are some of the influences that will affect your industry in 2021?

Wealth management is driven by a number of factors, but I would say the top driver would be what’s happening in the stock market and what’s happening with taxes — both income taxes and transfer taxes. Those are probably the primary drivers, and then you add in not only the generational transition (of business ownership) but the influence of women, for example. Women have come along professionally and as business owners, so it’s important to understand the interest of women as we’re looking forward in wealth management.

The next generation that is coming up, the emphasis may be a little different in terms of what that Millennial generation, which is the largest generation, is interested in and how they want to communicate with their advisers.

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