In our conversations with Registered Investment Advisors (RIAs), we frequently talk about the problem the bull market created: ETFs and passive mutual funds have dominated the last decade as the vehicles of choice for advisors looking for low-cost beta.
As US equity markets have charged forward, it’s been a win for you and your clients. However, while larger account balances are a good problem, they create challenges for RIAs attempting to build client wealth in the most tax-efficient way. As client accounts have grown with just a few passive holdings, the ability to tax loss harvest has been reduced to nothing.
With the market’s recent volatility, now may be a good time to review accounts for tax loss harvesting opportunities. But what to do with the proceeds as you wait out the wash sale period is open to debate. Do you leave the proceeds in cash, buy an alternative ETF, or look for a better option to consider?
The Potential Solution: Direct Indexing with Envestnet | PMC Quantitative Portfolios
Direct indexing has been available for years, and many RIAs use it to offer greater tax efficiency for their more sophisticated clients. Did you know that direct indexing strategies are also available for accounts with balances as low as $60,000?
Our Envestnet | PMC Quantitative Portfolios are custom direct indexing portfolios that can hold your existing ETF positions with cost basis issues while purchasing individual securities around the legacy ETF holdings. By moving your client’s account into a PMC Quantitative Portfolio as you tax loss harvest, you not only capture the loss while keeping your client exposed to the market today, but you also position the portfolio to take advantage of any tax loss opportunities that may come tomorrow.
Even when the market is up in aggregate, look at the opportunity for tax loss harvesting at the individual security level.
Our PMC Quantitative Portfolios can be combined into one account while you consider existing holdings, resulting in a customized portfolio for your clients and a scalable solution for you. To learn more about incorporating direct indexing into your practice, connect with our Envestnet | Tamarac RIA Development team at RIASales@Envestnet.com or check our resource landing page at https://www.tamaracinc.com/unified-managed-accounts/.
Direct indexing strategies have the risk of not closely track the performance of the underlying index they seek to replicate. While attempting to track an index, passive investments often do not consider a company’s profitability, financial health, or growth potential in their investment selection criteria.