(Washington)

Advisors and their clients have spent the whole summer dreading Biden’s tax plans. Two of Biden’s budgetary linchpins for raising taxes on the wealthy are: nearly doubled capital gains taxes and the elimination of the step-up in basis in inheritance. Until now, they had merely been proposals. However, yesterday the House Democrats passed a budgetary resolution to bring a full vote on the topic. It is expected to pass along party lines.

FINSUM: The Democrats have a very narrow path to getting this passed as part of their $3.5 tn spending package. However, if they can get every Democrat in the Senate to sign, it becomes a reality.

(New York)

Here is a tough fact for clients to accept: the major of retirees will need long-term care as they age. From an emotional perspective, that is difficult to expect. From a financial perspective, it is even worse. The average cost of long-term care is between $53,000 to $105,000 per year. This presents a major funding challenge for retirees.

FINSUM: Advisors need to help clients come to terms with this likelihood. Long-term care insurance is a good option for this situation. This usually costs between $1,375 to $3,600 a year for a 55 year-old man, and between $2,150 and $6,4000 for a 55 year-old woman.

(New York)

ESG has grown exponentially over the last couple of years as trillions of dollars have flowed into the sector. However, as the sector has grown, some gaps in its coverage have emerged. One big glaring hole is in income-focused ESG funds. Traditionally, it has always been thought that an investor who cares about income, just wants income and doesn’t care much where it comes from. This helps explain how out of 439 ESG funds aggregated by Morningstar, only 8 had an income focus.

FINSUM: The lack of ESG income funds makes sense as income-focused products often cater to retirees—the current age of whom generally makes them less interested in ESG. But opportunity awaits.

(New York)

UBS just put out a very interesting warning to a large segment of the equity market. As part of their overall market outlook update, UBS explained their view on earnings and the direction of the S&P 500. There are two very notable points they made. Firstly, and most importantly, they reminded investors to stop fretting over valuations. In their words “While valuations are higher than average, we remind investors that valuations have no correlation with market returns over time horizons less than three years … And valuations typically don't contract meaningfully unless investors are concerned about a sharp growth slowdown or a policy error by central banks. And secondly, they think the S&P 500 will rise 11.5% by the end of 2022.

FINSUM: This is a brilliant reminder—equity valuations mean very little and are more a reflection of macro outlook than a concern in their own right.

(New York)

Morningstar has added a lot of coverage to their model portfolio universe this year. Earlier in 2021 they expanded their coverage of ratings to 1500 model portfolios, an increase of 50%. Of all those funds reported on, only two of them took home their coveted gold rating: the Vanguard CORE series and the BlackRock Target Allocation ETF. Vanguard was noted as having highly diversified index funds and rarely making portfolio changes. Other funds that got acclaim, such as their silver rating, include American Funds Growth & Income and the American Funds Tax Aware Growth & Income series.

FINSUM: The world of model portfolios has grown nearly as dizzying as that of ETFs so these Morningstar guides are a big help.