Consumers Don’t Understand Tax Advantaged Solutions

“While some consumers may be very receptive to portfolio adjustments, others may need a little  more education from their advisor,” said Eric Henderson, senior vice president of Life Insurance and Annuities for Nationwide Financial. A recent poll by Nationwide reveals people age 35-64 with income of  $150,000 to $249,000 offer the ripest sales opportunities for advisors. The survey reveals the following:

• 16% of women expect tax code changes to decrease in household income significantly compared to 31% of men.
• 5% of women have met with a financial advisor to talk about how taxes may affect their portfolio, compared to 13% of men.
• 52% of women are concerned that changes to the tax code will hurt their portfolio compared to 69% of men.

These statistics reveal the percentage of those who say they completely understand the tax advantages of the following products:
• Annuities: 17% of women and 27% of men.
• Life insurance: 23% of women and 34% of men.
• 401(k) plans: 38% of women and 52% of men.

Women may have less knowledge on these matters because fewer have a financial advisor relationship, however women may be more receptive than men to learning more about tax-advantaged products.

Middle-aged survey respondents (ages 35-54) are less likely than older people to say they understand the tax advantages of annuities (56% vs. 73%), but are twice as likely to consider  purchasing another tax-deferred product (31% vs. 14%). Middle-aged people are more likely than older people to want  more education on annuities (51% vs. 37%), life insurance  (23% vs. 14%), and 401(k) plans (30% vs. 17%).

Eighty-four percent of people older than 55 say they are comfortable talking to their financial advisor about taxes, which suggests that they are at least open to having a conversation.

Those with $150,000 to $249,000 in income are more receptive to making portfolio adjustments. Fifty-two percent say that adjustments can be made to prepare their portfolio for tax-code changes, compared to just 36% of all survey respondents. Fifty percent want more education on annuities compared to 41% of the total survey population.

The changing tax landscape will affect most affluent investors.  But 60% of survey respondents say they won’t or are unsure whether they will meet with a financial advisor to discuss taxes, so it’s up to advisors to provide counsel clients about potential opportunities even if they may not acknowledge a need to have this conversation.  Nationwide Financial introduced a tool kit to help advisors converse with clients about taxes. For more information, visit www.nationwide.com.

Last Updated 10/4/2017

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