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The Trump Era Deregulation Boon for Business Climate, Financial Advisors

President Trump recently completed his 100-day milestone. And so far, for financial advisors, it’s been a good market – that promises to get better. Since Trump’s election, the S&P 500 is up nearly 12%, with half of that coming since his inauguration, one of the strongest starts of any presidency in recent decades (behind JFK and GHWB).

Recently, I caught up with George Morgan, a finance professor at the University of Nebraska-Omaha, and former financial advisor who says that when investors think of Trump, they should not think politically—but strategically. And that strategy is solidly pro-business—which is great for financial advisors and their clients.

“In any discussion of Trump, it’s not political,” he says. “What Obama did was political. Trump does not have a political philosophy.”

Trump has committed to rolling back Obama-era regulations which Morgan believes is the single-biggest boon to the business environment overall, and to investors. Here are three key areas of deregulation:

  • Environmental pragmatism. Trump’s appointment of Scott Pruitt to head the EPA and the rollback of Obama’s environmental regulations will free up business investment, Morgan says. “The business person doesn’t have to spend time taking care of spotted owl. They feel differently. Washington is not out there looking to get them.”
  • Dodd- Frank revisions. Trump has also committed to streamlining financial regulations—another boon for business investment, Morgan says. “After the subprime crisis, and Dodd-Frank was enacted, the Fed would buy bonds from the banking system because banking system is only one that has enough of them to sell. When banks sell bonds, they get money. They are supposed to loan it out,” he says. “Dodd-Frank says the bank must meet capital and quality requirements. That begins to close the door. As a business person, you’re in the middle of an environment where government has so many regulations against business. Businesses didn’t want to borrow, and banks didn’t want to loan.” Luckily, that’s changing.
  • Healthcare reform. One of the most harmful effects of Obamacare regulation has been its effect on full-time employment. Morgan says that if the GOP-controlled Congress can manage to repeal and replace Obamacare and get rid of the coverage mandates, employment will take off. “Now, if you work more than 30 hours, you’re considered full-time, and you have to have full benefits. They can hire you for 39 hours.”

Morgan says that while Trump has largely found success through executive orders on these issues, signs point to higher GDP growth as deregulation –and potential tax cuts – permeate the business environment. “For the past eight years, the rate of growth of GDP has been less than 2.5%. Historically, it’s 3.5%. If Trump can get us back above 3.5% GDP growth, we’ll see S&P 500 Index growth of 14-15%.”

He also thinks trade agreements will help. “He wants to trade with other nations in a way that benefits, not harms, the United States. A growing American economy gives us leverage at the bargaining table, and Trump is well known to be fond of making deals,” Trump says.
Bullishness aside, Morgan has a warning for financial advisors. They’d better get on board with Index Funds, and be aware of the discounted fees. Investors are not going to tolerate paying high fees in their 401(k)s for long. He believes that fee-only CFPs and discounted advisors will have advantages in the future for large swaths of investors.

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