For each portfolio you’re managing:
- You select a “target.” The “target” is simply the hypothetical portfolio you would buy for a client if they started with cash and no restrictions. Typically, there are somewhere between 5 and 50 different targets per firm, one for each client type (e.g. “Aggressive Growth” or “High Net Worth - Taxable -Aggressive Growth”, etc.).
- You specify any customization criteria you want to apply. This includes “never buys,” “never sells,” tax & expense management preferences, minimum trade size, etc.
- Every day, Smartleaf compares the portfolio to its target and, consistent with the customization parameters you’ve set for that portfolio, suggests specific tax-lot level trades that will keep the portfolio close to its target.
Every portfolio tracks – with adjustments for tax, expenses and customization criteria –a blend of one or more model (idealized) portfolios provided by investment analysts. This approach separates research (market beating ideas expressed in the form of model portfolios) and customization (tax management, social criteria constraints, etc.).
This lets you take advantage of the best investment research available while making it easy to customize your clients’ portfolios for individual tax management, risk management and specific investment selections. It automates customization and tax management, making it possible for you to simultaneously increase customization and consistency.
This “start with models then customize” approach is sometimes called “overlay portfolio management” (OPM).