Taxes are typically a client’s largest or second largest expense. In response to this fact, it is imperative that financial advisors develop and implement an approach to dealing with taxes to produce better outcomes. However, this is often easier said than done. The inherent complexities surrounding taxes can make it difficult to implement a firm-wide strategy that can be repeatable at scale.
Implementing tax strategies requires meticulous tracking and monitoring of investment positions and their corresponding tax implications. Advisors need to stay updated on tax rules and account for any changes in their clients’ portfolios. This can be time-consuming and may require sophisticated software or systems to efficiently manage the process. Additionally, each client’s tax situation is unique, with factors such as their income level, tax bracket, investment goals, and existing tax positions. Advisors need to assess each client’s circumstances and develop tailored tax loss harvesting strategies that align with their objectives. This personalized approach requires a deep understanding of each client’s financial situation and goals.
Fountainhead Asset Management (FAM) has worked hard to develop a comprehensive approach to tax loss harvesting that provides significant benefits to advisors. Advisors partnering with FAM can leverage its expertise and technology-driven solutions to optimize tax efficiencies for their clients. This strategic approach not only enhances after-tax returns but also strengthens advisor-client relationships, differentiates advisors from their competitors, and ultimately helps advisors deliver greater value while achieving a client’s financial goals.
FAM’s Approach to Tax Optimization
Tax Harvesting: FAM actively identifies and realizes investment losses where an equivalent exposure is easy to access, aiming to minimize current and future tax liabilities for clients. This proactive approach helps advisors deliver enhanced after-tax returns, maximizing the value of their clients’ investments.
Customized and Efficient Solutions: FAM implements tax loss harvesting at the household level and based on specific client characteristics, tailoring strategies to individual client circumstances. This personalized approach ensures that tax optimization aligns with each client’s specific needs and goals, enhancing the overall effectiveness of the strategy.
Seamless Integration: FAM’s tax loss harvesting services are seamlessly integrated into its automated platform, simplifying the implementation process for advisors. This minimizes administrative burden and allows advisors to focus on providing high-quality service and advice to their clients.
Competitive Advantage: By partnering with FAM, advisors gain a competitive edge in the market. FAM’s household level tax loss harvesting, combined with its no minimums and no additional fee structure, sets it apart from other providers. Advisors can differentiate themselves by offering this value-added service to their clients, demonstrating their commitment to optimizing tax efficiency.
Compliance and Risk Mitigation: FAM ensures compliance with IRS regulations and provides guidance to advisors to navigate potential complexities related to tax loss harvesting. This helps advisors fulfill their fiduciary responsibility and reduces the risk of potential tax-related issues, providing peace of mind for both advisors and their clients.
Long-Term Tax Savings: FAM’s approach to tax loss harvesting aims to defer taxes potentially for decades, allowing clients to invest the proceeds and benefit from compounding returns. This can result in significant long-term tax savings and improved overall investment performance.
IMPORTANT DISCLOSURE: The information contained in this report is informational and intended solely to provide educational content that we find relevant and interesting to clients of Fountainhead. All shared thought represents our opinions and is based on sources we believe to be reliable at the time of publication. This article utilizes artificial intelligence (AI) technology to enhance the content and provide additional insights. While we continue to make these reports available, we do not update past reports in light of subsequent events. Nothing in this letter should be construed as investment advice; we provide advice on an individualized basis only after understanding your own circumstances and needs.