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UBS: Wealthy warm to sustainability; aim to protect assets from Biden tax changes

·5-min read

Sustainable investing is becoming a bigger driver of investor decisions, according to new data from UBS, which found that the wealthy are looking to boost their portfolios with sustainable assets.

UBS Global Wealth Management’s quarterly sentiment survey, which polled over 3,000 investors and 1200 business owners with at least $1 million across 15 markets, found sustainability is more important to wealthy investors than ever. Climate change is becoming an increasingly pertinent topic driving policy and markets

According to the findings, a majority expect sustainable investing to “match or exceed those of traditional investments with 69% seeking advice on increasing their portfolio allocation.” Meanwhile, 67% are optimistic about their regional economy, and 63% are bullish on stocks, with 61% expressing a positive view about the next 12 months.

However, concerns over coming tax increases, soaring inflation and a polarized political environment are unsettling some.

Although major U.S. stock benchmarks set record highs this week and third quarter earnings are on a roll, President Biden’s proposal to raise taxes on investment income for wealthy Americans looms large. UBS found that 59% of investors said they approve of the administration's budget plan, compared to 41% who disapprove of it.

There's a “little hesitation on investors' part. They’re still basically planning to increase investments in the coming months but just a little uncertainty,” Jeff Scott, head of client insights at UBS, said in an interview.

Some of that stems from what's going on in Washington with multiple proposals on the table and being discussed. There's a lot of interest among clients and investors [about] what should I be doing to prepare for changes to tax policy?,” Scott added.

DC politics 'number one investor concern'

NEW YORK, NEW YORK - JULY 17: People participate in a
NEW YORK, NEW YORK - JULY 17: People participate in a "March on Billionaires" event on July 17, 2020 in New York City. The march, which included a diverse group of activists, politicians and citizens, called on New York Governor Andrew Cuomo to pass a tax on billionaires and to fund workers excluded from unemployment and federal aid programs. Joining the marchers were dozens of taxis whose drivers have been especially impacted by the drop ridership due to Covid-19. According to data from the Organization for Economic Cooperation and Development, income inequality in the United States is the highest of all G7 nations. (Photo by Spencer Platt/Getty Images)

According to UBS, more than half of investors support Biden’s tax proposals — but want to make “a smart move” as most expect the impact to ripple across their portfolios.

In fact, UBS found that 40% of U.S. investors are considering shifting to assets that do not generate adjusted gross income, while 36% have already shifted some assets into trusts ahead of the potential changes to the tax code.

Meanwhile, the survey cited, 34% of investors have increased financial gifting to family and friends — a popular way to avoid taking a tax hit — while 39% have sought expert tax advice.

Rising prices have triggered anxiety around the world as a surge in demand merges with strains in the supply chain. More than half of U.S. investors surveyed by UBS are personally concerned about the impact of inflation on their assets, which is up 11% from last quarter.

And amid stubborn high inflation and stalling economic growth, U.S. investors want the administration to focus on specific priorities, the survey shows. More than 70% are watching how the administration will unify the country and get COVID-19 under control.

“The politics in Washington has been the number one investor concern,” Scott told Yahoo Finance.

Democratic proposals are still in flux, with polarizing proposals like a billionaires tax and family leave all but dead for now. One idea would tax the paper investment gains of the ultra-wealthy, in an attempt to capture revenue from billionaires whose “tradable” assets-like stocks—appreciate in value each year without being taxed.

Under the current law, those gains aren’t “realized” and taxed until the underlying assets are sold.

Still, U.S. business owners surveyed have a positive outlook toward a robust recovery, with 81% having an optimistic view about their business for the next 12 months.

Meanwhile, as companies across the country struggle to find enough employees, 44% of owners polled by UBS plan to hire new staff, and 49% of businesses will keep the same workforce. Meanwhile, only 7% plan to downsize.

“We saw a little bit change in terms of maybe some less hiring, but most business owners do indicate they want to hire whether or not they can hire at their current cost expectations, that's a different story,” James Jack, UBS’ head of business owners strategic client segment, said in an interview.

The US needs roughly 10 million people, including low-wage and high-skilled workers, to fill job openings nationwide— and only 8.4 million Americans are actively seeking work. This tight labor market has added challenges to business owners for the past 6 months.

Along those lines, 79% of business owners have struggled with employee recruiting, UBS found, while 76% have said they are up against wage inflation and weak customer demand.

And some 72% of businesses are still trying to manage employee retention, the survey found. Companies are still struggling to create a “hybrid, more flexible way of working,” Jack said, and not everyone has “changed their paradigm yet.”

While hiring new staff is difficult, business owners are responding: 69% of owners have offered more flexible work hours, while 67% of businesses have also increased base pay.

Still 66% of businesses have added to their employee benefits to lure workers in, as 65% are adding more flexible work locations, and 60% have offered new or larger year-end bonuses to workers to retain them, according to the survey.

“Folks are holding out a little bit, trying to get a little bit more terms of pay and benefits, but also trying to find a company that fits them,” Jack added.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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