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Topics: Blog, Tax Management, Householding

Automated Household-Level Rebalancing

Managing multiple accounts to a single target in a tax-optimized manner

TL115_Householding

 At Smartleaf we’re all about automating customization and tax management. Through automation, our system can manage a lot of stuff at scale: tax-sensitive transition, custom asset allocation, ESG constraints, substitutions, custom product choices, tax loss harvesting, gains deferral. And more!

But there’s one thing our system hasn’t yet automated...householding, managing multiple accounts to a single target, leveraging tax-advantaged accounts to reduce taxes overall.

That is about to change. Over the next three quarters, we’re rolling out support for automated household-level rebalancing.

Here's what our automated household-level rebalancing system will do:

It will monitor all the accounts in a household to make sure they “add up” to what the advisor wants for the household as a whole.

When the accounts don’t add up to the right asset allocation, the system will suggest specific, tax-lot level trades to get the household accounts back to where, as a group, they should be.  The trades the system generates will:

    • Keep costs low by minimizing turnover.
    • Minimize the tax effect of sales by preferentially realizing losses in taxable accounts and gains in tax-advantaged accounts.
    • Minimize future taxes by putting assets that generate taxable income in tax-advantaged accounts.

There’s nothing really new here conceptually. It’s what good advisors have been doing all along.  What we’re adding is automation, which empowers advisors to deliver optimized household management to all investors.  

Sophisticated tax management is rapidly becoming table stakes. And we’re pushing this trend just as fast as we can.

Topics: Blog, Tax Management, Householding

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