Wealthy Advised to Sell for Gains Before Unfriendly 2013

Sell.

That’s the message from some financial advisers, who are telling wealthy clients that the remainder of 2012 amounts to a last-chance sale on federal tax rates. Taxes are set to rise in January in the U.S., pushing the top rate on dividends to 43.4 percent from 15 percent and the top rate on capital gains to 23.8 percent from 15 percent.

Even if Congress averts the so-called fiscal cliff of tax increases on investments, income and estates, pressure to reduce budget deficits will mean higher taxes eventually, said Ron Florance of Wells Fargo & Co. (WFC) The answer is to take advantage of historically low rates and move taxable income and investment gains into this year, said Florance, managing director of investment strategy at the company’s private bank.

“It’s the opposite of what people normally do,” said Florance, whose clients usually have at least $1 million in investable assets. “You’re paying taxes today in anticipation of higher rates in the future.”

Advisers at companies including Wells Fargo, Bank of America Corp., Bank of New York Mellon Corp., JPMorgan Chase & Co. (JPM), Northern Trust Corp. (NTRS) and U.S. Bancorp (USB) are discussing with their wealthy clients such strategies as selling appreciated securities, relocating assets to tax-deferred retirement accounts, converting IRAs, exercising stock options and making large gifts to heirs this year.

By Margaret Collins and Richard Rubin
Bloomberg