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Edward Jones, UBS, BNY Wealth Talk Strategy with Clients for Biden's Tax Proposal

May 7, 2021

Wealth management chiefs believe that President Joe Biden’s current tax proposal isn’t necessarily a done deal but point out some strategies wealthy clients may want to deploy this year anyway.

Some clients may want to bring income forward, take advantage of the high estate tax exemption or pay taxes and convert a traditional individual retirement account into a Roth IRA, according to executives from UBS, Edward Jones and BNY Mellon.

Jason Chandler, head of U.S. wealth management at UBS, tells Bloomberg that Biden’s tax proposal still has to go through Congress but the firm is considering the possible ramifications of the changes. These include potential changes in terms of liquidity, or how much money someone needs day-to day; longevity, or investing in the family and their future; and legacy, or the kind of “imprint” the client wants to leave on the family and their community, he says, according to the news service. As the proposal makes its way through Congress, UBS plans to speak to clients about capital gains rate changes from the longevity perspective and about a change in the estate tax law from the perspective of legacy, Chandler tells Bloomberg.

Penny Pennington, managing partner at Edward Jones, points out that the proposed changes could take months to play out. She tells Bloomberg that those changes aren’t as likely to effect economic and market performance as other factors — namely, corporate earnings, economic growth and interest rates.

“We shouldn’t let the tax tail wag our portfolio in terms of how we invest fundamentally,” she tells the news service.

But Pennington also tells Bloomberg that some clients may want to bring income forward to 2021 or recognize some capital gains while they’re lower than they may be in the future.

Catherine Keating, CEO of BNY Mellon Wealth Management, tells the news service that the tax changes as they stand now are likely to be revised, since Biden has a slim majority, and aren’t likely to be retroactive as the country is “trying to nurse the economy back through the COVID crisis.”

Keating also believes that some clients may want to “accelerate” some income into this year, she tells Bloomberg. There are also some strategies wealthy investors should probably consider “no matter what,” she says.

“The $11.7 million estate tax exemption, for example, is set to expire in 2025 anyway, and everyone’s portfolios are tipping at highs, and they do have unrealized gains,” she tells Bloomberg.

Keating also believes it could be the right time for some clients to diversify, pointing out that the five largest technology stocks now make up 25% of the S&P 500. She also tells the news service that it may be time to convert a traditional IRA into a Roth IRA by paying taxes now. And investors can also consider some strategies that don’t have to do with the market, such as locking in the current low interest rates, she tells Bloomberg.

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By Alex Padalka
  • To read the Bloomberg article cited in this story, click here if you have a paid subscription.
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Tags:  Regulatory/legal issues , Tax planning , BNY Mellon , Edward Jones , UBS

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