Headlines you need to know this week
Technology is key to business growthAs working remote is becoming the new normal, many financial professionals are seeking ways to optimize technology to grow their businesses. A recent survey found the pandemic drove increased demand for financial advice in 2020. More than half of respondents (52%) said they realized they needed help managing their finances due to the pandemic. Almost half reported relying on their financial advisor more than ever, and 25% engaged an advisor for the first time. In a separate survey, 40% of advisors said virtual meeting apps, such as Skype or Zoom, are important to continue serving clients remotely.
Investors monitoring the SALT tax capInvestors are monitoring potential action to repeal the cap on SALT (state and local taxes) deductions, according to a recent commentary. The cap was instituted by the Tax Cuts and Jobs Act (TCJA) of 2017. With the recent election, Democratic leaders will have control of the Senate. In the past, several Democrat leaders have said they would make repealing the SALT cap a priority. Prior to the TCJA, taxpayers could use unlimited SALT deductions when itemizing returns.
Investors working with advisors are optimisticA recent survey found that investor optimism has improved since the pandemic began. An online survey of more than 1,000 investors in November found that 82% of respondents who had met with an advisor in the last six months were more confident about their investments, compared with 56% who did not meet with an advisor. In addition, 80% of respondents who met with an advisor believed that they were on track to meet their financial goals.
Social Security funding woes deepenIn addition to the solvency issues surrounding Social Security, the pandemic may also impact future retirement benefits. With fewer people working and contributing to Social Security combined with a slowing economy, some investors are concerned about the program’s funding. A recent article gathered comments on the outlook for policy changes in the coming year.
House to consider ESG investing billsMembers of Congress have introduced two bills in the House to address issues around offering investments that focus on ESG (environmental, social, and governance) in retirement plans. The bills focus on defining how fiduciaries may consider ESG factors when selecting investments, and how to communicate that strategy to savers
Gender inequality impacts retirementWhether claiming Social Security or saving in a 401(k), women have a more difficult time saving adequately for retirement, according to a recent report. For those claiming Social Security, pay inequality can make a significant difference in retirement benefits for women. Access to workplace savings is another issue of concern. Women represent the majority of the 55 million workers who are not eligible or covered by an employer-sponsored retirement plan, according to the Brookings Institution.
Advisors monitor compliance outlookAdvisors are monitoring potential changes in compliance regulations under the incoming administration, according to recent commentary. In 2019, the Securities and Exchange Commission passed Regulation Best Interest, setting guidelines for advisors offering retirement advice. The Department of Labor recently finalized a companion rule. As the rule does not go into effect until after inauguration day, it may experience changes.
Gig workers may need retirement adviceThe number of independent contractors — or so-called "gig" workers — has continued to rise over the last decade. In 2019, independent contractors made up 16% of the workforce, according to a report. That total may grow as many workers who lost their jobs during the pandemic took on freelance or contract work this year. Advisors may want to reach out to this segment of workers to offer them retirement guidance. Pew Research noted that only 13% of self-employed workers are saving for retirement.
Investors seek creative content from advisorsThe pandemic has changed the way financial professionals interact with investors. Many of the trends involving digital engagement are expected to be long-lasting. Investors are seeking interactive, creative content from advisors, according to a recent commentary. Video has become an important tool, and investors are looking for podcasts, webinars, and other content.
Advised workers are more confidentA recent survey found that investors working with a financial advisor are more confident about their retirement readiness. Advised investors are 45% more likely to invest and 25% more likely to have sufficient cash reserves, compared with investors without advisors.
Workers seek advice on range of topicsWorkers are seeking more from their workplace financial wellness programs, according to a recent survey. In the survey of more nearly 6,000 households, one third of respondents said that the pandemic has influenced their attitude about finances. Of those respondents, 50% have experienced a decline in income due to the pandemic. As companies offer broader wellness programs, workers are focused on a range of topics beyond retirement saving, including emergency funds, 529 plans, and college debt. Older workers are looking for personalized guidance, the report noted.
Investor optimism continuesInvestors remained optimistic in the most recent AAII Investor Sentiment Survey. While bullish sentiment — that stock prices would increase in the next six months — fell by 4.6 percentage points, the level of optimism remained above the historic average. A bearish sentiment, that stock prices would fall in the near term, slipped by 0.6 percentage points and remained at a below-average level.
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