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Why advisors are focusing on taxes, political volatility

Timely insights on the issues that matter most to investors.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

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      Boston - Some Americans surprised by higher tax bills this tax season got a reminder that managing taxes is a year-round activity for investors and their financial advisors.

      Although helping clients navigate market volatility and an uncertain political landscape is important, financial advisors can also add value by focusing on tax efficiency.

      Market volatility and the political environment dominated investor discussions with advisors in the first quarter of 2019, according to Eaton Vance's Spring 2019 Advisor Top-of-Mind Index (ATOMIX) survey. Ninety-five percent (95%) of advisors reported interest among their clients in reallocating portfolios to address or capitalize upon recent volatility, and nearly nine out of ten (88%) said the current political environment is a key part of client conversations. Moreover, three out of four advisors (75%) said fear is the primary current motivator for their clients, a 74% increase since October 2018.

      According to the ATOMIX survey, many advisors maintain a focus on portfolio tax efficiency, employing several tactics to mitigate clients' tax bite:

      • 37% prefer municipal strategies
      • 32% opt for tax-managed equity strategies
      • 25% use tax-loss harvesting
      • 7% manage high capital gains

      Additionally, 61% of advisors reported that their clients have concentrated stock positions that could trigger capital gains taxes when sold.

      "While market volatility and politics can be distractions, leading advisors find time to help clients understand their personal tax situations and implement smart tax management solutions for their portfolios," said John Moninger, managing director of sales. "And the very best advisors approach tax management as a twelve-month-a-year proposition, not just an April or December activity."

      To help U.S. individual taxpayers and their advisors make smarter investment decisions by better understanding the investment taxes they pay, Eaton Vance recently launched an easy-to-use Investment Tax Calculator with newly enhanced features and functionality. The Investment Tax Calculator is available to the general public on a free website accessible at eatonvance.com/mytaxrate.