By every account, the presidential election is going to be a close race. Until then, it is adding an unprecedented level of uncertainty. Tim Steffen, the director of financial planning at Baird, talks to Associate Editor Mason Braswell about what advisors should tell their clients when they ask the million-dollar question: "What should I do?"

1. How is the overall wealth management industry leaning in this election?
It seems to be a pretty heavily leaning Republican group. That's not universal, and if you look at some of the statistics of where campaign contributions have come from, certainly at least four years ago the Wall Street donations seem to go heavily on the democratic side. But, if you talk to individual advisors, they seem to be much more on the Republican side. The reason as far as that might be is that advisors are going to support things that allow them to do more business, and low tax rates on investments are going to help grow business. They're going to be supportive of a candidate that's going to support lower taxes. Plus, you have a lot of high income people in this business and they're going to want to support somebody, in general, who's going to keep their taxes lower.


2. How soon could the fiscal landscape change?
If the balance of power stays the way it is now-Democratic Senate and Republican House-or even if [Republican candidate Mitt] Romney were to win but the Senate stays Democratic; you get a two versus one split of some kind. Then, we're more likely to see something happen before the end of the year. If there is a major swing in power where one party gets control of all three-House, Senate and White House, I don't think there's a chance you would see anything happen before January. Neither side is going to want to compromise because they don't have to-come January. Yes, the White House is important but it's going to depend on what happens in the House and Senate too.


3. What should advisors be telling their clients through this uncertainty?
That's the million-dollar question. We get calls from clients all the time asking what they should do, and the best we can say is-if this happens, if you think this is going to happen-this is what you do. Or, if you think that's going to happen, then this is what you do. I get asked all the time: 'What does your crystal ball look like?' I say, 'Awfully cloudy.' You have got to be willing to accept that if you give clients strong advice right now the tables could turn and cause something to make that advice not appropriate. The one thing we can all agree on is that the tax situation won't get any better than it is right now. It might stay the same; it might get worse, but it's not going to get any better.


4. How do you address clients' tax concerns?
This may be as good as it gets right now. Take advantage of it if you are really concerned. The best case scenario is that things stay the same. By that I mean, not making rates higher. If you've got stocks or positions you're looking to sell in the relatively near future, it makes sense to do it this year rather than next, just to lock in the 15%. [In fact] 15% capital gains are at a historical low. It's unlikely you're going to get better than that, so why hold off a few more months and do it next year?


5. Regardless of who wins, is there anything we can look forward to after the elections?
If you talk to our folks who study this stuff, they say that once we get some level of certainty that always gives some sort of boost. Whether that lasts long remains to be seen, but we're expecting to see some boost around then.

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