Filed Under:Annuities, Variable

RIAs yearn for alternative investments

As the financial markets veer in an unpredictable fashion, goaded, no doubt, by the continuing budget battled in Washington, registered investment advisors (RIAs) and fee-based advisors are increasingly turning to alternative investments, tactical management and tax-deferred strategies to tamp down volatility and mitigate taxes.

A recent survey sponsored by Jefferson National found that 64 percent of RIAs and fee-based advisors have upped their use of alternative investments over the past five years, with 55 percent indicating such tactics taking on a more prominent role in their allocations within the next five years.

Likewise, the application of tactical management strategies is also preferred by RIAs and fee-based advisors. Nearly two-thirds (61 percent) said they favor tactical investing methods in today’s marketplace compared to 39 percent who indicated they would opt for a buy-and-hold approach.

Overwhelmingly, the reason behind the greater utilization of alternative strategies was to manage volatility, the factor cited by 73 percent of the respondents. The ability to defer taxes also ranked highly as an avenue to control volatility.

However, alternative investments are typically tax inefficient in that they generate ordinary income or short-term capital gains, which incur higher tax rates, Jefferson National remarked in a statement accompanying the survey results. The company’s main product, it should be noted, is a flat-fee, tax-advantaged variable annuity targeted to RIAs and fee-based advisors that features in excess of 75 alternative investment options.

Citing estimates from the nonpartisan Tax Policy Center, the country’s tax bill is forecast to rise by $500 billion, or an average of approximately $3,500 per household, Jefferson National added.

According to the survey, more than 90 percent of the respondents said their clients are concerned about a hike in capital gains tax, and 76 percent of the RIAs and fee-based advisor suggested they would consider incorporating alternative investments if they could be accessed in a low-cost, tax-deferred account.

Polled online between Sept. 18 and October, about 400 RIAs and fee-based advisors participated in the survey.

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Nichole Morford

Nichole Morford
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