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Republicans’ Tax Reform Boosted Financial Confidence, Report Claims

June 1, 2018

The Republican tax cuts had an overwhelmingly positive effect on financial confidence among clients, claims a new report from Wealthcare.

Following the Tax Cuts and Jobs Act enacted in December, 80% of active financial plans had an uptick in confidence, according to Wealthcare, which analyzed more than 10,000 plans across every state and Washington, D.C., at varying asset levels. In addition, 16% of the plans remained neutral, according to the report.

Wealthcare, which offers software for the wealth management industry, says in a press release that it used a “proprietary financial planning tool which is rooted in Monte Carlo simulations” to measure the confidence impact. Advisors use Wealthcare’s tool to pinpoint and monitor their clients’ confidence about their financial goals, the company says.

Wealthcare also found that the longer the plan’s duration, the bigger the boost in confidence: The largest increase in confidence occurred in plans with a length of 31 to 40 years, followed by plans with a length of 21 to 30 years.

Meanwhile, for clients whose plans mostly have tax-deferred assets, the state tax rate had little correlation with their confidence boost, according to the report. But the average effect on confidence decreased for higher-tax states, Wealthcare found. For example, high-tax states such as California and New York had “minimal” increase in average confidence, but low-tax states such as Florida and Texas had a slightly higher boost in confidence, according to the report.

By Alex Padalka