Lately, we’ve been thinking about transition. No, not that transition, portfolio transition.
OK, like everyone else, we’ve been thinking about the Presidential transition, too. But the truth is that the Presidency is pretty much out of your individual control. On the other hand, portfolio transitions happen every day, and you’re completely in charge. Whether we’re talking about transitioning legacy holdings of a new client or just implementing a change in asset allocation, portfolio transitions can be as significant to your clients as presidential politics.
Unlike the Presidential kind, portfolio transitions don’t have to be difficult. In fact, even the most complex cases — say, a new portfolio with low basis holdings, strict tax management and restricted positions — need not be any harder to manage than any other portfolio. You can control tax implications with tax budgets and normal tax-management settings; you can control turnover and trading with turnover budgets.
The interesting thing is that for a modern portfolio management system, it turns out that there’s nothing all that special about “transition” portfolios. With an advanced rebalancing system, every portfolio is analyzed with an eye to bringing it closer to its target in a manner that is sensitive to taxes, turnover, trading costs and constraints. Some portfolios have further to go than others, but few are exactly on target, and so almost all are, effectively, “in transition.” All can be rebalanced in an efficient and mostly automated manner.
So, good news. Whether or not you’re ready for a Presidential transition, you can always be prepared for portfolio transitions.
For more on this topic, check out The Three Types of Wealth Management Firms.
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