Make portfolio transitions less taxing

Many investors today hold a basket of ETFs. But that shouldn’t preclude them from considering the advantages of moving to a more tax-efficient, customizable SMA. Here’s a review of scenarios to make the transition make sense.

Feb 05, 2021

A Taxing Dilemma: An Analysis of Liquidating ETFs in Favor of SMAs

Many wealth management clients have begun to see the value of investing in separately managed accounts (SMAs)—which offer diversified, index-like, and customizable exposure—as an alternative to ETFs. However, what does this mean for investors who already hold a basket of appreciated ETFs but would like to unlock the potential of a Custom Core^® portfolio? To fully invest in customizable SMAs, investors will likely need to realize gains today for benefits that will accrue over the next several years. This research brief explores this dilemma and provides guidance for recognizing when it might be time to sell—and when it might be time to hold—under reasonable sets of uncertain future scenarios.