Factors such as changes to estate tax laws and the initial wave of retirement for the Baby Boomers will bring a year of significant change for financial advisors and their clients.According to a survey conducted by Impact Technologies Group Inc., a provider of financial sales software for the banking, capital markets and insurance industries, its annual industry trends forecast for 2006 predicted that action by the federal government to change the tax code and reform or repeal the estate tax will have the most impact on how advisors handle their clients' financial plans.
Under proposed changes to the federal tax code, one area in particular would likely have a significant effect on how Americans plan for their future - retirement savings options.
"There may be sweeping changes to retirement accumulation options, which may ultimately result in more ways to save for retirement," said Maxey Sanderson, Impact's vice president of product development. "This will have financial planners busy for some time as they re-educate clients and modify their clients' investment portfolios."
The forecast also projected increased activity in estate planning. "Many individuals have deferred planning for their estate, waiting to see if there would be reform, repeal or possibly see the previous high rates restored," according to Sanderson. "Reform appears to have the upper hand at the moment with a large exemption (probably $5 million) and lower estate tax rates (probably 15 percent to 20 percent). Repeal would result in a similar amount of tax, but it would be as capital gains tax when the heirs sold the inherited property instead of when they inherited it, with a large exclusion for the spouse and family. Either way, there should be an increase in planning this year."
2006 also marks the year that the first wave of Baby Boomers begins to retire, which will have financial planners putting significantly more focus on post-retirement distribution plans.
"While accumulation is alive and well, advisors must take action on distribution planning if they plan to capitalize on this market opportunity that will last for the next 10 years," said Impact president Kevin Clay.
