Understanding Tax Cost in Portfolio Transitions

By David Gordon, CFA®, CPWA®

A reprinted article from November/December 2022 in Investments and Wealth Monitor.

Systematic tax-loss harvesting is a key driver of the growing popularity of Direct Index SMAs for clients with taxable accounts. But many advisors may not be aware of the differences between after-tax reporting standards promulgated by the CFA Institute and the requirements of the IRS. Since a client’s ultimate tax experience may differ substantially from their original expectation, this paper outlines key things that advisors should keep in mind when discussing such projections with clients.