Advisors Speak Out: Economy, Taxes & Post-Pandemic Environment

FSI Financial Advisor Members Share Thoughts and Expectations in Recent Poll

The last year or so has been a whirlwind. We experienced a global health crisis, a quarantine, a presidential election and a hyper-volatile market environment marked by a run up (and then a crash) in “meme stocks,” fickle cryptocurrencies and technology companies.

Despite the challenges, our members remained resilient, determined to run their businesses through the extended tumult and serve their clients, who in many cases needed their advice like never before. And while uncertainty ran high in 2020, financial advisors have clear opinions about what is in store for the rest of 2021 and beyond, according to the results of a recent poll of more than 700 FSI Financial Advisor members conducted from May 18-25, 2021.

Our poll results show that advisors expect economic conditions to continue to improve; taxes for corporations and investors to go up; uncertainty to plague the regulatory environment and virtual client engagement tools like Zoom and Teams to endure, at least some of the time. Following is a closer look at the results:

The Current State of the Economy

Advisors are optimistic about the economy in the wake of the devastation wrought by the coronavirus-related shutdowns, with almost two-thirds believing it will continue to expand over the next six months. Fewer than 20% of the respondents expect a correction during that span.

At the same time, advisors remain worried about the prospect of inflation. A plurality said they expect the Biden administration’s infrastructure proposals would fuel price hikes, which could force the Fed to raise rates quicker than most expect, potentially giving markets a shock.

Tax Policy Changes Coming?

Advisors overwhelmingly believe that taxes on corporations will increase to some extent sooner or later, despite Democrats having only a nominal advantage in the Senate. Over 92% believe corporate rates will go up at some point.

A smaller but still significant number (83%) also think capital gains taxes will increase. Only about 17% of respondents said such rates would either stay the same or decline.

The Regulatory and Legislative Landscape

Advisors are clearly on edge about efforts underway across the country to alter established precedents regarding independent contractor rules. Meanwhile, the lack of consistency among the different regulatory agencies is also causing some anxiety.

More than 62% of respondents said the most significant threat to their business was losing their independent contractor status. Nineteen percent responded that the biggest danger was patchwork standard of care rules from the Securities Exchange Commission, the Department of Labor and the states.

The poll also showed that advisors are worried about how long Reg BI will remain in its current form. Two-thirds said they have concerns that the SEC will seek to alter it, with the changes rendering the rule unworkable for our industry. Only 11% say they are not concerned about the SEC reconsidering its position on Reg BI.

A Return to the Office

While some industries are still mulling how and when to return to in-person work models, most of the poll respondents have already made those decisions. The responses were consistent with comments made by several high-profile financial services executives who have recently touted the benefits of professionals getting together to collaborate in person with each other or with clients.

Over 75% of poll respondents indicated that they – along with their staff – are already back in the office. An even larger number (82%) said that they have resumed in-person meetings with clients.

At the same time, over 70% said they would continue to leverage technology to interact with clients, a sign that while in-person communication remains vital, the rules of engagement have changed.

As we move into the second half of 2021, the overarching attitude among our members is one of optimism as the country returns to a more normal way of life and the industry continues to implement new work models. And although new challenges will undoubtedly arise in the months ahead, our members have shown throughout the pandemic that the resilience and commitment of the FSI community should never be underestimated.