Tax Management: the Highest-Rated Benefit of SMA Accounts

"The ability to harvest losses for taxes was the universal choice, regardless of advisor channel," said Mike Evans, Director of BenchMark Research at FUSE Research. In markets that are no longer offering easy returns, it's no secret why these strategies are at the top of advisors' minds.

Asset managers stand to gain a competitive edge by supplementing their current successful strategies with tax management.

An Opportunity for Asset Managers

Advisors are looking to offer more personalization to meet evolving client demands, and as noted above, providing individualized tax management strategies is a critical way to offer the customization investors are seeking. By offering tax-managed versions of already successful strategies, asset managers can take advantage of this trend and grow existing advisor relationships as well as potentially establish new ones by offering advisors new capabilities to:

• Personalize tax management to each client's unique situation.

• Manage the client's overall tax cost from the portfolio, balanced against the risk profile and overall goals.

• Offer tax transition services for new clients or current clients moving new assets.

• Enable conversations with high-net-worth prospects they may not have been able to attract without tax management capabilities.

• Unlock avenues to other new assets with this more sophisticated portfolio solution.

Considering the complexity of federal and state tax laws, as well as portfolio administration, simply adding tax management to a list of services offered could require significant time and resources to establish. However, finding a partner with the right expertise and experience can help speed up the process and get you to market quickly.

Vestmark's Offering to Asset Managers

Vestmark offers a plug-and-play tax management solution for asset managers with tax overlay and transition services on top of existing or new SMA strategies.

Vestmark’s offering covers all the bases, including:

• Tax-aware account transitions: Vestmark’s process offers more than the typical overlap analysis. It looks to retain appreciated securities, identifies sale lots using highest in, first out (HIFO), conducts lot level analysis, and more to produce the most tax-efficient transitions possible. Unlike other providers, Vestmark allows the advisor and client to set a capital gains budget to indicate what they are willing to pay in taxes in real dollar terms, then facilitates the manager staying within that budget.

• Overlay management of existing accounts and households: Leveraging VestmarkONE®, Vestmark's investment team implements your trades in a tax-aware manner, including ensuring that the most tax-efficient lots are sold, that wash sale rules are followed, tax harvesting opportunities are identified throughout the year, and other opportunities to tax-optimize the portfolio are implemented.

• Tax optimization of life-cycle events: The team can also provide tax-optimized implementation for significant portfolio actions like large deposits and withdrawals, and other events.

Offer Additional ROI with Vestmark

No matter the state of the market, asset managers and advisors are looking for ways to potentially improve clients’ after-tax returns while reducing risk. Vestmark's tax management and personalization capabilities offer managers a simple, low-cost way to amplify their business through optimized tax-managed SMA strategies.

Learn more by reading "Vestmark's Tax Management Capabilities," or contact us to learn more.

1. FUSE Advisor Trend Monitor Report – Product Usage: The Advisor View. January 2023.

TAX TRANSITION AND OVERLAY SERVICES OFFERED BY VESTMARK ADVISORY SOLUTIONS (VAS). VAS DOES NOT PROVIDE TAX OR LEGAL ADVICE.

There are several investment-related risks associated with tax loss harvesting. There is potential that the tax loss harvesting may:(i) negatively affect the overall performance of an investor’s portfolio; and (ii) result in a temporary overweight and/or underweight of certain sectors, securities, and/or cash in an investor’s portfolio that influences performance, and VAS will not consider any other account that the investor may have. Tax-loss harvesting involves the risks that the new investment could perform worse than the original investment and that transaction costs could offset the tax benefit.