Investment Solutions Roundtable: Year-Round Tax Management Adds Value for Clients

55ip, Envestnet | PMC and New Century Financial Group Discuss Year-Round Tax Planning Advantages and Tools

A day may come when tax season ends and you can sleep – But it is not this day!

December is filled with tradition – festive meals, gatherings with friends and family and, of course, tax loss harvesting. 

Holiday or not – clients of financial advisors will always call with year-end tax planning moves that must be completed by December 31. 

Sometimes those same clients will awkwardly ask a retroactive question – Increasingly, that question runs along the lines of the following:  “What tax-smart strategies did you employ when designing my portfolios and managing my assets?”

Beware of Wasted Tax-Smart Opportunities

Financial advisors who aren’t adopting significantly enhanced and proactive tax management investment strategies starting each January could be shortchanging their clients – Especially when it comes to preserving wealth, providing income and generating growth.

And as regulators and legal prudence demand that we document investment recommendations, it seems nonsensical to leave any tax-smart investment returns open to chance.

The reality is there exist today a plethora of fintech solutions designed to make year-round tax planning feasible, efficient yet customizable per client.  As such, there’s little excuse for financial advisors to not adopt tax-smart strategies for their clients.

All of which brings us to this month’s Investment Solutions Roundtable experts to address this month’s question: “Should advisors and wealth managers engage in tax management for clients year-round, and if so, what solutions do you suggest?”

This Month’s Roundtable Participants – 55ip, Envestnet | PMC and New Century Financial Group

I am pleased to present the contributions of the following industry experts to this month’s roundtable:

  • Dexter McAuley, Executive Director, Enterprise Business Development at 55ip, a fintech company that provides tax-smart transitions, management and withdrawals through its investment strategy engine centered on its proprietary ActiveTax Technology®.
  • Michael Pescatore, CIMA®, Senior Vice President and Overlay Services Director of Envestnet | PMC, which provides a full range of tools, capabilities and resources that strengthen the relationship between advisors and their clients. 

Dexter McAuley, Executive Director, Enterprise Business Development, 55ip

In today’s market environment, alpha is hard to find, even for the most skilled active managers, so it’s not what you make – it’s what you keep – that matters. 

Dexter McAuley, Executive Director, Enterprise Business Development, 55ip

As a result, tax management has come to the forefront, because an extra 1% per year achieved through tax loss harvesting significantly improves clients’ results in a way that will sum to sizeable amounts over the years.

Historically, tax loss harvesting was a tedious year-end exercise generally limited to only the largest accounts, but technology now enables a more advanced systematic approach to year-round tax management for advisors, who can deploy tax-smart investment management across their practices with intelligent automation, delivering greater value to their clients and businesses.

Conveying the value of tax management to clients can be difficult because it seems theoretical, but when advisors provide personalized tax savings reports, clients can monitor tax savings just like traditional performance.

In addition, automated, tax-smart transitions can unlock stranded assets such as concentrated stock holdings or the movement or updating of accounts with embedded gains. Systematic tax loss harvesting takes advantage of volatile markets to accelerate these transitions.

Michael Pescatore, Senior Vice President and Overlay Services Director, Envestnet | PMC   

Michael Pescatore, Senior Vice President and Overlay Services Director, Envestnet | PMC

Truly beneficial tax management doesn’t start at the end of the year. Instead, an advisor should align tax management with every other aspect of a client’s overall financial life, so that after-tax returns across a client’s portfolio are optimized throughout the year. 

Automated, data-driven technology solutions are critical to providing clients with smart tax management that demonstrates value, especially when potential tax code changes make clients anxious. 

Although technological innovations enabling smart tax management allow advisory practices to nimbly adapt to any tax code updates, not enough clients receive the tax management guidance they want. 

Almost 70% of new accounts being opened on the Envestnet | PMC platform are managed accounts – and optimizing tax impact for these accounts will increase in importance for advisors as the industry continues its shift from brokerage to advice relationships.

Richard Oring, President, New Century Financial Group

Richard Oring, President, New Century Financial Group

As fiduciaries, our responsibilities extend beyond managing investment returns and risk for our clients. The days of client meetings that are only focused on portfolio returns are in the past. How much your clients keep compared to what they must pay Uncle Sam is a critical component of your value as a financial advisor.

I want you to – plan your tax intelligently.

Tax planning shouldn’t start in December when investment companies mail estimated capital gains information. Instead, planning should start a few months before the new tax year starts and continue throughout the year.

Your client’s current and projected tax situation will significantly impact their tax liability. The most important aspect of tax planning is to estimate your client’s adjusted gross income, modified adjusted gross income and provisional income to help them plan for:

  • Phaseouts or elimination of credits
  • IRA contributions or conversions
  • The amount of Social Security that will be taxed
  • Maximizing low tax brackets with distributions from an IRA
  • Charitable giving
  • Possible zero tax on long-term capital gains and qualified dividends
  • Medicare premiums

Adding tax planning to a professional investment practice isn’t complicated – an advisor can use tools including software to help with tax projections, annual tax review courses and annually updated tax reference books.  

Please Send Your Ideas for Next Month’s Roundtable

Thanks to Dexter McAuley, Michael Pescatore and Richard Oring for their valuable insights and guidance on incorporating tax planning into wealth management services! 

Wishing you a holiday season filled with joy and a New Year that brings continued success – defined on your terms.

For our fellow WSR community members:  As always, please let us know your thoughts on this roundtable, as well as suggestions for future experts and discussions. What investment problems and challenges occupy your thoughts? If you’d like to hear from experts on a topic, chances are thousands in the WSR community would too. 

Allison Pratt, WSR Investment Solutions Roundtable Chair

Equally important, please don’t hesitate to share this month’s WSR Investment Solutions Roundtable feature with your industry friends, colleagues and contacts, if the content resontates with you.

As we close out 2021, I wish you a holiday season filled with joy and a New Year that brings continued success – defined on your terms.

Allison Pratt is a strategic advisor to C-suite teams and boards of directors for wealth management and asset management firms across the country.  She can be reached at

Related Posts

Sign Up for Our Newsletters

Sign Up for Our Newsletters