Wealth Management
(New York)
The last year has been rough for annuities rates. The big drop in yields once the pandemic took hold meant annuities providers had to quickly and sharply cut their rates. But at the same time, the need for annuities has never been higher, given volatility and increased rates of retirement as Baby Boomers age. So where can one find the best annuities? Check out Fidelity, Allianz, New York Life, USAA, and MassMutual. For example, Allianz has no annual fees on their fixed index annuities. New York Life offers some very strong variable annuity options, including the ability to withdraw 10% of the account without penalty, and a minimum account value of only $2,500.
FINSUM: More and more advisors are moving into annuities as client need is rising. This has led to innovation in the space (such as no-commission annuities for RIAs) as well as more product creativity.
(Washington)
In its fourth-quarter earnings report…see the full story on our partner Magnifi’s site
(Washington)
Ask any high earning northerner about the worst element of Trump’s tax cuts, and you will invariably here the same answer: the introduction of the SALT cap (state and local taxes). The puny cap sent effective tax rates spiking in higher tax states and helped propel a migration southward. Well, that mostly hated legislation might be headed for extinction as calls from lawmakers are growing louder to get rid of it. Interestingly, the push to get rid of it is not coming from Republicans, but Biden’s own party, since it disproportionately affects blue states with high taxes. According to CNBC, “More than 20 Democrats and nine Republicans have joined a bipartisan caucus that has pledged not to vote for any legislation that doesn’t include a repeal of the SALT cap”.
FINSUM: This has always been a pretty rough piece of legislation (logical as it may be), and it is easy to see that Biden may have to compromise on this.
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(New York)
The annuities business has long been “plagued’ by commissions. High fees paid out to sales people had a multi-part effect that hurt the industry’s reputation. On the one hand it made the products look less competitive, and on the other it led to some bad behaviors among brokers. However, as the industry has been changing, so have the fees structures, with commission-free annuities now an important fixture of the market.
FINSUM: DPL Financial specializes in providing commission free annuities from top providers so that RIAs can now sell annuities.
(Washington)
Joe Biden jut rocked markets in a big way. Yesterday afternoon, Bloomberg reported that Biden was planning to increase the capital gains tax rate on the wealthiest Americans by double, or up to just under 40%. The same rate as income taxes. Market reversed very sharply, but have been strong today. The tax would only affect Americans earning over $1m per year, which is 0.3% of the population, but taken in conjunction with other proposals to change the basis for capital gains taxes as it concerns inheritance, this is another big step.
FINSUM: The full scale tax overhaul on the wealthy has begun in earnest. Inheritance taxes and now capital gains taxes look likely to soar, with the latter not only on the wealthy. Advisors need to be very mindful of these changes as they disproportionately affect those who employ financial advisors.
(New York)
There are a number of forces propelling annuities forward at the moment. Not only is their component of tax deferral getting more and more valuable given the new administration’s tax plans, but the need and desire to lock-in guaranteed income has grown over the last year. The single biggest force, however, is the US demographic trend. An astonishing 10,000 people per day are turning 65, and 16.5% of the population is now 65 or older. By 2030 all Baby Boomers will be over 65. That means this gigantic cohort is moving out of their wealth accumulating years and into their drawdown years. Many need guaranteed income.
FINSUM: A lot of advisors have an automatically negative reaction to annuities, but the market has improved a great deal in recent years, and for any clients they are a good option.