The Election: Good for Advisors or Bad?

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dgeracioti's picture
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We published an article right after the presidential election results were in, asking: "Obama Winds. Do Advisors Lose?"Whew! A couple of readers beat up on us. One called us "right-wing nut jobs" but most were more civil statting that since Obama took office, the S&P 500 is up more than 74%. It was a fair question and we surveyed several industry executives and securities lawyers. Here is how the article, by Megan Leonhardt started (would love to hear the forum speak its collective mind on the subject):

President Barack Obama's reelection to another four-year term sets the stage for a broad and significant impact on financial services and the wealth management industry.

Wall Street and its stakeholders were largely not in Obama’s camp throughout the campaign; in a recent WealthManagement.com poll, 70% of financial advisors said a Mitt Romney presidency would be better for business. The biggest concern? Many think the continuation of an Obama presidency will only bring increased regulation for financial advisors, higher taxes, and stifling national debt . . . click here for the rest of the article.

Staff Writer Diana Britton wrote an article, "Some Say Obama Went Easy on You. But Will It Be No More Mr. Nice Guy?" but concluded that Obama, despite the passage of Dodd-Frank, didn't come down heavily for investor protection, but he will now. 

What do you think?

mstudy's picture
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Joined: 2011-10-05

I think that the majority view is wrong about Romney being better for the financial advisors. Romney's plan to stimulate growth by lowering taxes is not a good recipe for success. Cutting taxes is a very ineffective method of stimulating the economy, especially when the tax cuts are focused on upper income earners. Tax cuts for wealthy individuals are saved more than they are spent. Furthermore, regulation has proven time and time again to be necessary in the financial industry. Lax regulation has proven to have disastrous consequences for securities markets (Great Depression, Great recession - both partially caused by lax regulations.) I don't think we need more regulations but certainly not less. One of the key reasons for the Great recession was a SEC decision to allow broker dealers to substantially increase leverage. I don't think Obama has great ideas on how to improve the economy but I don't think he will make it worse either.

Ulairi's picture
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Joined: 2011-11-17

mstudy wrote:
I think that the majority view is wrong about Romney being better for the financial advisors. Romney's plan to stimulate growth by lowering taxes is not a good recipe for success. Cutting taxes is a very ineffective method of stimulating the economy, especially when the tax cuts are focused on upper income earners. Tax cuts for wealthy individuals are saved more than they are spent. Furthermore, regulation has proven time and time again to be necessary in the financial industry. Lax regulation has proven to have disastrous consequences for securities markets (Great Depression, Great recession - both partially caused by lax regulations.) I don't think we need more regulations but certainly not less. One of the key reasons for the Great recession was a SEC decision to allow broker dealers to substantially increase leverage. I don't think Obama has great ideas on how to improve the economy but I don't think he will make it worse either.

The great recession is due more to the convergence of government and business. President Obama believes that the government and big business should be even more intertwined. I think that is a critical mistake. We should not have private profit with public risk. We're just setting up for another fall.

Savings is important. Capital formation is important. I don't think Romney nor Obama are very good for advisers. I think of Romney won, my day to day job would be easier because most of my clients and prospects tend to be Republican. Both parties go with a top down approach and that's not good for me or the country.

KingBobby's picture
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Joined: 2011-10-03

mstudy wrote:
Tax cuts for wealthy individuals are saved more than they are spent.

Followed by invested after a KingBobby call. :p

But I agree while tax cuts aren't necessairly a magic formula for major growth of the economy, keeping them higher or raising them also doesn't seem to be a magic formula for increasing tax revenue.

mstudy's picture
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Joined: 2011-10-05

KingBobby wrote:
mstudy wrote:
Tax cuts for wealthy individuals are saved more than they are spent.

Followed by invested after a KingBobby call. :p

But I agree while tax cuts aren't necessairly a magic formula for major growth of the economy, keeping them higher or raising them also doesn't seem to be a magic formula for increasing tax revenue.

Almost by definition, an increase in taxes would raise tax revenue. I don't think you want to raise taxes substantially at this point because the economy is fragile. However, where do you get the money from? I think you have to be careful with austerity measures at this point

KingBobby's picture
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Joined: 2011-10-03

mstudy wrote:
KingBobby wrote:
mstudy wrote:
Tax cuts for wealthy individuals are saved more than they are spent.

Followed by invested after a KingBobby call. :p

But I agree while tax cuts aren't necessairly a magic formula for major growth of the economy, keeping them higher or raising them also doesn't seem to be a magic formula for increasing tax revenue.

Almost by definition, an increase in taxes would raise tax revenue. I don't think you want to raise taxes substantially at this point because the economy is fragile. However, where do you get the money from? I think you have to be careful with austerity measures at this point

Charts from the IRS show tax revenues not making any significant difference with changes in tax rates over the years but show substantial differences depending on GDP growth. Taxing the rich is popular for votes; for us advisors, it's disappointing in one sense, but allows for many opportunities to find alternative value to our clients.

mstudy's picture
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Joined: 2011-10-05

Ulairi wrote:
mstudy wrote:
KingBobby wrote:
mstudy wrote:
Tax cuts for wealthy individuals are saved more than they are spent.

Followed by invested after a KingBobby call. :p

But I agree while tax cuts aren't necessairly a magic formula for major growth of the economy, keeping them higher or raising them also doesn't seem to be a magic formula for increasing tax revenue.

Almost by definition, an increase in taxes would raise tax revenue. I don't think you want to raise taxes substantially at this point because the economy is fragile. However, where do you get the money from? I think you have to be careful with austerity measures at this point

Widen the tax base.

How would you widen it?

Ulairi's picture
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Joined: 2011-11-17

mstudy wrote:
Ulairi wrote:
mstudy wrote:
KingBobby wrote:
mstudy wrote:
Tax cuts for wealthy individuals are saved more than they are spent.

Followed by invested after a KingBobby call. :p

But I agree while tax cuts aren't necessairly a magic formula for major growth of the economy, keeping them higher or raising them also doesn't seem to be a magic formula for increasing tax revenue.

Almost by definition, an increase in taxes would raise tax revenue. I don't think you want to raise taxes substantially at this point because the economy is fragile. However, where do you get the money from? I think you have to be careful with austerity measures at this point

Widen the tax base.

How would you widen it?

Did you see the Huntsman tax plan? I think that is a darn good start. Just raising marginal rates isn't going to do shit to help with our debt problems. It's a bandaid. We need fundemental tax reform. I think lowering the rates and getting rid of all deductions and credits is a great start. I think we need to make sure that hedge funds, tech companies, hollywood, and other companies are not getting special treatment. The problem with our country is all the kick backs are built into the tax code. All of the speical interests are so invested in making sure they get speical treatment within the code and no one wants to talk about it. We cannot just raise taxes on the income earners and expect it to fix anything. I also believe, and because I heard from so many in Hollywood that people need to pay their fair share that we should go after the dishonest hollywood accounting schemes and reinstate the 20% excise tax on movie tickets, dvd/blu ray sales and movie downloads. Hollywood helped us after WW2 and I think it's about itme they help us again.

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