(Washington)

The SEC is sending some very disconcerting (if you are advisor), and not so subtle signals on its plans. This version of the SEC has taken a very different tact in its appointment of critical staff. Effectively, it has closed the revolving door. And what we mean, is that in contrast to previous SECs, this one has brought almost no one in from the industry at a senior position. Instead, it is being staffed with prosecutors, consumer advocates, and other regulatory-oriented government types. The appointments seem to be a reflection of Gensler’s policies priorities and views on how he wants the SEC to conduct itself during the Biden era.

FINSUM: The SEC is sending the loudest message it possibly can without writing it on the wall. The “read between the lines” is clear: enforcement is going to be intense.

(New York)

When clients think about retiring early, Social Security benefits and their timing are often a critical consideration. However, what most don’t realize is that health insurance costs are often the biggest hindrance to retiring early. This means advisors have a crucial role to play in helping advisors plan for retirement healthcare costs. One of the main options for keeping costs lower is to use Obamacare (ACA insurance) for the period between retirement and Medicare eligibility. However, this takes significant planning, as the pricing for this is based on modified adjusted gross income (MAGI). The way MAGI is calculated includes some standard forms or income, but excludes others, such as Roth RIA contributions.

FINSUM: Advisors need to be careful in how to structure client income during this period of retirement as it can have a very material effect on insurance pricing and thus cost of living.

(Washington)

Since May, the prospect of huge tax hikes on the wealthy has weighed over the advisor and HNW landscapes. Biden is planning to significantly increase capital gains taxes, and most alarmingly, is planning to get rid of the step-up in basis at death. With that in mind, a new product has been surging to the forefront as the work-around to Biden’s new proposals: private placement life insurance. PPLI is a type of life insurance where payouts flow through to beneficiaries tax-free. However, they are complex for clients to understand and take some significant diligence. According to a law professor at the University of Chicago, “Private placement life insurance poses a serious obstacle to President Biden’s goal of guaranteeing that high-income individuals pay tax on large gains at least once per lifetime … PPLI is a massive loophole — entirely legal, easy to exploit, and politically very hard to close”.

FINSUM: So this seems to be a good, if complicated and restrictive, work-around to the inheritance tax issue, but it does not address capital gains.