Topics: Blog, Automated Rebalancing, Tax Management, Wealth Management

Introducing Smartleaf Automated UMH Rebalancing

Smartleaf adds support for automated household-level account management

townhouses

Smartleaf launched in 2003 as a platform for the management of highly customized accounts. We automated complex tasks like tax optimization, social screens, custom product mixes, custom asset allocations and the like. And we eliminated the need for sub-accounts, thereby supporting true Unified Managed Accounts (UMAs) containing any combination of equities, mutual funds, ETFs, ADRs.

Last week, Smartleaf quietly released a big enhancement. Our system now goes beyond UMAs to support the scalable management of Unified Managed Households (UMHs). We automate the joint management of a group of accounts — say a 401K, an IRA and a taxable account — to a common asset allocation in a tax efficient manner.

With our new UMH functionality, Smartleaf’s system will ensure that the holdings of the multiple accounts, if combined, mimic the target asset allocation for the household as a whole1, 2. And we’ll do so in a way that:

  • Follows your product preferences for each account, e.g. “when buying fixed income in taxable accounts, buy bonds, in other accounts buy corporate bonds”
  • Follows your asset location preferences, e.g. “don’t buy bonds of any kind in my taxable account”
  • Preferentially rebalances in tax deferred accounts to avoid taxes on realized gains
  • Avoids wash sales across accounts
  • Minimizes trading and turnover, e.g. “don’t sell equities in one account and buy them back in a another, unless instructed otherwise”

And, of course, at the account level, we’ll still implement tax optimized trading, ongoing loss harvesting, social screens, etc.

We haven’t made a lot of noise about our new UMH capabilities. Yet. Stay tuned.


1One way to do this is to just have every individual account be a mini-copy of the whole, but this isn’t the only way. Suppose, for example, you have two accounts, each worth $100 and you want to jointly manage them to a 50/50 equity/fixed income split. You could have each account have $50 in equity and fixed income, but you could also have one account be all fixed income and the other all equity. Either way, when you combine the holdings of all the accounts, they add up to what you want.

2Alternatively, you can use our householding functionality as a guardrail to make sure that the combined holdings don’t drift too far outside a desired household target.

Topics: Blog, Automated Rebalancing, Tax Management, Wealth Management

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