Equity markets soared in 2017, boosting the asset level of many financial advisors.
But advisors had to content with a variety of regulatory and compliance issues, too, which entailed substantial investments of their time and spending.
After nearly a decade of strong growth since the financial crisis, how upbeat are today's advisors? And what are their top concerns for business growth this year?
These questions were tackled in TD Ameritrade Institutional's 2018 RIA Sentiment Survey, released this week.
The latest poll includes RIA views on the stock markets and the overall investment and industry climate for both investors and advisors.
"Looking ahead to 2018, RIAs generally like what they see — for their clients and for themselves," said Vanessa Oligino, director of business performance solutions for TD Ameritrade Institutional, in a statement.
For the poll, the firm spoke with 300 RIAs overseeing an average of $161 million in client assets. The interviews took place in late November and early December, during congressional negotiations on tax legislation.
Read on for more details on what advisors are most concerned about for the year ahead:
With the rapid pace of tax changes taking place, it's not surprising that 87% of RIAs polled viewed the tax plan as a top issue affecting client portfolios.
This factor is followed by corporate earnings, 85%, and interest rate increases, 79%.
In last year's survey, the top concerns were rising rates, 89%; corporate earnings, 88%; and the incoming administration of President Donald Trump, 83%.
According to former tax attorney Andy Friedman, advisors must support their clients in navigating the Tax Cuts and Jobs Act. Individuals' and businesses' tax situations can change, says Friedman, as "many of the provisions" in the law are slated to expire.
Friedman, the publisher of The Washington Update, adds that the new tax law repeals the deduction for investment fees and expenses, such as advisory fees paid in connection with separately managed accounts.
He also points out that businesses should pay close attention to the changes for pass-through entities. Business income earned by those entities (partnerships, limited liability companies and S corporations) flows through to the owners' tax returns under the new law as opposed to being taxed at ordinary income rates.
As for corporate earnings, reports on results from the final period of 2017 will be issued starting this Friday.
While taxes matter to clients, according to 62% of RIAs surveyed, investors are more concerned with having enough money to retire, 87%, and what they can spend in retirement, 81%.
Clients are broady affected by the changes to the tax code. But there are other changes afoot, as well.
For instance, as part of the new tax legislation, a new type of Consumer Price Index will be used used for marginal personal tax rates, tax credits and the standard deduction: the Chained Consumer Price Index for All Urban Consumers, or C-CPI-U, instead of the more traditional CPI-U.
The chained CPI adjusts for changes in purchases as consumers substitute cheaper products and services for more expensive ones, and thus usually rises more slowly than the traditional CPI measure. This means taxpayers will move more quickly into higher brackets as their incomes rise, while the tax credits they receive and standard deduction they take will rise more slowly.
Furthermore, tax and Social Security observers are concerned there could be steps taken to index the Social Security cost-of-living adjustments, or COLA, to the index.
