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

We’re Not a Rebalancing System

How Smartleaf differs from ordinary rebalancing systems.

Ceci n'est pas une pipe.

We’re not a rebalancing system. 

Well, OK, yes we are. But not in the normal sense. For most folks, the purpose of a rebalancer is to help you do what you did before, just faster and easier. At heart, that’s not what we do. We’re good with the “faster and easier” part, but the goal is not simply to speed up doing things the way you did before. We aim to reimagine the rebalancing process from the ground up.

Traditional rebalancing systems carry out your commands for specific trades — e.g. “sell IBM and buy Ford” or “bring a portfolio back to a model.” And traditional rebalancing systems provide alerts, perhaps telling you if there’s a loss harvesting opportunity or if your proposed trades generate too much taxes.  

Us? Not so much. While we can also carry out one-off commands and provide alerts, our goal is to let you set high-level goals and delegate the details. If we’re doing things right, you tell our system how you want the account managed, and, like a good administrative assistant, it does it. We call this “parameter-based rebalancing,” where parameters include instructions like:

  • Implement tax sensitive transitioning
  • Apply an ESG screen
  • Practice year-round loss harvesting
  • Remove real estate as an asset class and rescale
  • Use a direct index for US large cap, etc.

In this way, rebalancing, even complex rebalancing, can be automated. Tax management and customization are no longer on-the-fly adjustments. They’re built right in. 

What’s this level of automation good for?  First, and not surprisingly, it’s more efficient and compliant. Second, by making customization and tax management incrementally costless, it makes it possible to customize and tax optimize every account, no matter how small. Third, and perhaps most importantly, it lets advisors specialize, not in rebalancing, but in providing, well, advice. 

"If we’re doing things right, you tell our system how you want the account managed, and, like a good administrative assistant, it does it."

The firms we deal with typically have concluded that performance-, trade- and product-oriented value propositions are in decline. They wish, instead, to lead with a value proposition founded on financial planning. Tax and customization are also important. Their aim is to be their clients’ “lifetime financial coach”. And to help achieve this goal, they wish to free the client-facing advisor from having to spend time rebalancing portfolios. To this end, they’ll centralize rebalancing, while bringing the customization and tax management they offer to a higher level.1 Some firms are going beyond centralization towards outsourcing. They do it to focus on their core competency, and as with centralization, to increase the levels of customization and tax they can offer their clients.2 

In short, our clients are rethinking their business. Part of that rethink is a reimagining of basic approaches to rebalancing portfolios. Which is not really the purpose of ordinary rebalancing systems. It is the purpose of ours.


1The idea that centralization allows for an increase in customization and tax management is counterintuitive to some. The default assumption is that centralization means a “cookie cutter” solution. The reality is the reverse — centralization makes it easier to automate customization and tax management, which makes it easier to implement.

2Centralization or outsourcing is usually the aim, but it’s not one size fits all. Some will centralize everything. Others centralize a portion of their book but keep advisors involved with a few, usually more traditional, accounts,  Others keep advisors involved but with better tools (in which case, we are just a normal rebalancing tool, just more automated).

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

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