The U.S. presidential election is in its final weeks, and the impact of either candidate’s policies could be very different on family offices and wealthy investors when it comes to taxes, regulation, and the general investing climate, say analysts.
As the race tightens, more high-net-worth Americans are going public with their political preferences. Billionaires Elon Musk, Bill Ackman, Stephen Schwarzman and many leading Silicon Valley voices are supporting Donald Trump, while Pritzker family office head James Pritzker, Rockefeller family office head David Rockefeller Jr., Soros family office head Jonathan Soros and Laurene Powell Jobs back Kamala Harris.
In a recent UBS survey, 57% of wealthy investors favored Harris, and 53% of business owners preferred Trump. And recently, Duquesne Family Office founder Stanley Druckenmiller predicted that Trump would defeat Harris in the election, though he noted that things can change quickly.
“It’s an evolving situation,” the legendary investor told Bloomberg. “If you had asked me this 12 days ago, I would have said, ‘I don’t have a clue; it’s still a total toss-up, and I don’t have any conviction who is going to win the election.”
Wealth tax or tax cuts?
Both candidates have very different approaches to tax policy — especially regarding the fate of Trump’s 2017 Tax Cuts and Jobs Act (TCJA), which reduced the top tax rate for high earners to 37% and expires next year. Trump has said he’d like to extend the TCJA, which will give households in the top 1% an average tax cut of more than $60,000 in 2025. Harris seeks to let the TCJA expire, restoring the top rate to almost 40% for married couples earning more than $450,000.
“The TCJA is a really, really big deal and very important,” said Pat Soldano, president of Family Enterprise USA, which promotes and advocates for family businesses. “We surveyed our members, and we’re all concerned about the expiration of that law. We’d like to keep everything in it.”
Additional tax relief for wealthy Americans is also possible if Trump carries through on his vow to repeal the Affordable Care Act, which includes taxes for high-income households. The combination of both measures could deliver an average $400,000 tax reduction for ultra-high-net-worth Americans, says the left-leaning Center for American Progress.
Harris’ proposals for a wealth tax and the taxation of unrealized gains — a 25% tax on these gains for individuals with fortunes exceeding $100 million — “are likely to have a significant impact on the financial landscape for high-income earners in America,” said Dennis Shirshikov, a professor of finance, accounting and economics at the City University of New York.
The biggest concern to family enterprises surveyed by Soldano is a potential reduction in the estate tax exemption. Under Trump, the exemption that allows wealthy families to pass along substantial gifts tax-free was doubled to $13.61 million in 2017. Harris seeks to lower that exemption to $3.5 million, where it stood in 2009.
Soldano’s members are also concerned about the elimination of the step-up basis, which adjusts the value of an inherited asset when it is passed on after death, resulting in substantially lower taxes for heirs.
What will be the rules of the road?
On the regulatory front, the outlook is a little more complicated. Currently, family offices are exempt from registering as investment advisers, and most are not required to disclose assets. “I would suspect that family offices would remain exempt,” said Amy Lynch, a former regulator at the Securities and Exchange Commission and Financial Industry Regulatory Authority (FINRA) and now founder of FrontLine Compliance.
Harris’ regulatory approach is likely to align closely with Biden’s agenda, Lynch said. “There’s always talk about changes to rules regarding business formation, access to capital markets, offerings of securities — there could be some changes there if Trump is elected,” she said, adding that could also include “loosening of strings” around private offerings.
Project 2025 — a blueprint for a Trump administration from the Heritage Foundation — calls for consolidating major financial regulators and stripping power away from the SEC. The Trump campaign has distanced itself from Project 2025 despite the fact that most of the agenda’s authors were part of Trump’s team in his first term as president.
“If regulation is taken away,” Lynch said, “it could be chaos in the markets, a free-for-all that could lead to a financial crisis. There could be no rules for any of these firms — and that affects the way transactions are executed, how broker-dealers operate, how family offices operate.”
A family office member who preferred to remain anonymous told Crain Currency that he’s still undecided. On the one hand, he believes that Trump’s policies could lead to a hotter economy that benefits investors. But the candidate’s promise for massive across-the-board tariffs concerns him, since it could likely lead to supply chain shocks and higher prices for products, which hurts the economy and creates volatility.
“Investors always like to stay on the right side of the table,” Lynch said. “It’s harder to know if you’re on the right side of the table under a Trump administration because the playing field would be very uneven.
“In that scenario, you’ve got a more volatile market, and it would be more difficult to feel confident that your investing decisions are profitable. That could be good for hedge funds who love volatility but hard for family offices trying to maintain their wealth.”
More important than the presidential election, investors should pay attention to broader trends in the economy, said Bobby Mascia, CEO of Mascia Capital Group, a private family office in Montville, New Jersey. He will be paying more attention to the Federal Reserve’s interest rate decisions.
“The fundamentals remain,” Mascia said. “Look for strong companies and income-generating assets that exhibit some stability in value so that you can reinvest that income into equities and buy into moving markets.”