At a glance
- Lassner said clients may share goals while differing in tax situations, legacy holdings, liquidity needs and preferences.
- Taxes are a constraint portfolio managers should weigh when choosing which securities to sell and which gains to realize, Lassner said, not a reporting consequence of investment decisions already made.
- For advisors running model portfolios, one model now produces different after-tax results across households with different cost bases.
Personalization at scale has weakened the trade-off between customized portfolios and efficient ones, Ken Lassner, senior product strategist for direct indexing at Northern Trust Asset Management, told InvestmentNews on Nov. 13.
Lassner said clients may share goals while differing in tax situations, legacy holdings, liquidity needs and preferences. Two investors holding the same security can face very different costs to sell it, depending on when they bought and how much unrealized gain sits in the position.
Taxes are a constraint portfolio managers should weigh when choosing which securities to sell and which gains to realize, Lassner said, not a reporting consequence of investment decisions already made.
For advisors running model portfolios, one model now produces different after-tax results across households with different cost bases. The sell list becomes part of the investment decision rather than a downstream step, and the relevant comparison shifts from pre-tax return or tracking error to what the client keeps after tax.
Reported by the Products & portfolios desk from InvestmentNews. Published . Corrections