Some financial advisors may be feeling optimistic about the future now that Donald Trump has been elected. His plans to stimulate economic growth, create new jobs and cut taxes for businesses and wealthy taxpayers are what some might see as a shot in the arm for both the gross domestic product (GDP) and the markets. Trump has also stated his intention to reduce the level of regulations for financial advisors and other small businesses, which will give them greater freedom to operate and spend less on compliance issues. It's possible that these factors could add up to a substantial increase in the size of many client portfolios.
What Advisors Are Saying
Many small business owners are celebrating Trump’s election and looking forward to paying less in taxes and enjoying greater freedom. Jeannette Bajalia, founder of Woman’s Worth and president of Petros Estate & Retirement Planning, told Wealth Management she hopes that there will be major changes to the tax and healthcare laws for small businesses. She says that she is not able to afford to pay for healthcare under the Affordable Care Act, and her current tax burden has made it virtually impossible for her business to grow any further. “The tax code for small business is horrendous,” she said. “It’s not favorable to me as an owner, and it’s not favorable to my employees. Small business is the bread and butter of our nation, and we can create jobs and keep the economy afloat.” (For more, see: What Trump's Presidency Means for Advisors, Retirement.)
Other advisors have expressed a similar sentiment. “Freeing business from over-regulation will spark the economy and employment. This is very good news for everyone,” Sean Castle, an advisor with Cherry Creek Investment Advisors, said in an interview with Wealth Management. He believes that the markets will rise in the wake of Trump’s election, led by pharmaceutical and energy stocks.
Trump will most likely be able to implement at least some of his policies fairly quickly, given that he will have the backing of a Republican Congress. He plans to reduce the number of tax brackets from seven to three and put a cap on many common deductions such as home mortgage interest. He also intends to end the carried interest loophole that Wall Street has enjoyed and also repeal the estate tax, which could provide a boost to farmers and small business owners. Trump also may try to repeal parts of the Affordable Care Act.
Populism was a major factor during the election for both political parties. But the majority of advisors don’t see this as a threat to the markets, and it is not impacting how they do business. Douglas Stone, a wealth advisor with SeaCrest Wealth Management, told Wealth Management that Trump’s policies will lead to greater growth and prosperity for America. “Populism will allow more investors to invest. They’ll have more money for themselves by way of less taxes, health premiums and better jobs.” (For more, see: Donald Trump's Tax Plan: Who Will Love It.)
However, not all advisors are happy that Trump will become our next President. Cynthia Zalewsky, president of Saratoga Investment Solutions, expressed anger and dismay at Trump’s election and feels that the country has taken a huge step backwards. She also feels that if Trump repeals the Department of Labor's fiduciary rule, it will be a blow to investors. Kipley Lytel, managing wealth advisor and portfolio manager with Montecito Capital Management Group, also expressed concern about what the future holds with Trump in office, saying that there is a fair amount of uncertainty over what will happen at this point, and that the possibility of a future trade war could put a damper on economic growth.
The Bottom Line
Trump’s stated economic goals and policies have resonated well with many advisors. Although some have expressed misgivings about his trade and social policies, many advisors feel that his administration will be good for the economy and their clients’ portfolios overall. For now it is too early to tell how many of these policies will be implemented. (For more, see: Can Trump Roll Back the Fiduciary Rule?)