Markets have been volatile, and the end of this new paradigm is nowhere in sight. In this environment, advisors are increasingly turning to asset managers who can offer more individualized solutions for their client portfolios.

One concern high on investors’ lists is tax management. Volatile markets call for more active portfolio management, and the identification of tax alpha can help investors potentially keep more of their returns through improved after-tax performance. This, of course, is why advisors consistently rank tax management as the most important benefit of SMAs. We believe that when well executed, adding tax management and tax alpha to separately managed account (SMA) strategies can be a great way to gain a competitive edge in an otherwise crowded marketplace.

Provide Sales Teams With a New Offering

Add Tax-Managed SMA Strategies

Your sales team knows the investment story of your already successful strategies, so why not arm them with another version, and give them additional things to talk about with the new strategies:

• A tax-managed version that offers potentially higher after-tax returns
• Case study about the way after-tax returns compound over time for investors
• Talking points to advisors about the ways these strategies can help them create more individualized portfolios for their clients
• Talking points about how these strategies can help advisors unlock new assets with tax transition services

Research shows that optimizing an individualized tax-managed strategy offers the potential to generate an excess of 1% annual after-tax returns over 30 years, which can grow investments by as much as 32% in total dollars.² Optimized tax management becomes a valuable selling point in this context.

Adding optimized tax-managed SMA strategies to a base of successful strategies already in place can allow you to increase sales team efficiency - building on what they already know – and potentially grow your overall AUM.

However, developing and managing customized, tax-managed strategies can be complex, expensive, and inefficient to manage without the right systems and processes in place.

Further, since tax law is complex and contains many moving parts, optimizing individualized tax managed strategies can be a large undertaking. Finding the right partner and platform solution can help you get to market quickly and easily with this highly sought-after strategy.

Working With the Right Partner

The right partner can accelerate the process of providing optimized and individualized tax management and tax transition services to even the most complex accounts. Vestmark’s experienced team and powerful technology platform are ideal for asset managers seeking to grow their AUM. They make it possible to keep active investment strategies in-house and add tax-managed strategies to an investment line-up quickly and easily, with no up-front implementation costs and no ongoing platform fees.

In today’s uncertain markets, we believe that tax-managed strategies can help asset managers offer a new approach to satisfy investor and advisor demands for more personalized investment solutions. Contact us to learn more about how Vestmark’s solution can help you grow assets in this challenging market.

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

1. Svea Herbst-Bayliss, “Top hedge funds earned sharply less for clients in 2022, LCH data shows.” Reuters, January 23, 2023.
2. Shomesh E. Chaudhuri, Terence C. Burnham & Andrew W. Lo (2020), “An Empirical Evaluation of Tax-Loss-Harvesting Alpha,” Financial Analysts Journal, 76:3, 99-108.

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.