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Differentiating your practice based on performance is a challenge. Client portfolios are increasingly geared toward benchmark exposures, given the prevalence of low-cost, passive investing versus active management. However, while pre-tax performance might appear similar across mutual funds, SMAs, and ETFs, after-tax performance can vary substantially. This is where advisors using tax-managed strategies can separate themselves from the pack.

But which solution is right for your practice? Are you looking to serve an exclusive client base, or for scalability? For a public equities sleeve for larger portfolios, or a full account solution for smaller accounts? How can you effectively deliver after-tax returns to a range of clients without diluting your brand or losing time?

Tax-Managed Index Strategies, Powered by 55ip

Tax-Managed Index Strategies (TMIS) powered by 55ip have the flexibility to support a wide range of practice objectives. Constructed with granular ETFs to facilitate active tax management, TMIS have both the sophistication to support the most complex client needs, as well as simple implementation that makes them scalable across your practice.

Advisor-Controlled: Retain ownership of advisor-branded strategies. Highly customizable: ability to blend indices and implement across multiple asset classes.
Tax-Smart Management: Fully automated, with year-round tax loss harvesting (TLH) to optimize tax benefits. Potential to deliver improved after-tax returns while maintaining targeted index exposures.
Simple & Scalable: Simple implementation typically requiring only 10-20 ETFs. Can be a total portfolio solution or sleeve within a portfolio. Utilized on accounts as small as $50k.

How TMIS Work

Whether advisors track a standard index or their own customized benchmark, they can incorporate TMIS into their existing asset allocation. TMIS provide an intuitive, tax-efficient implementation, with each account controlled by the advisor using 55ip’s simple digital solution. The advisor sets up the account in minutes; 55ip automates the rest.

Harvesting Across The Portfolio While Maintaining Targeted Exposures

Chart showing Harvesting Across The Portfolio While Maintaining Targeted Exposures
For example, for indexing to the S&P 500, TMIS use 11 sector ETFs, representing each of the S&P 500’s industry sectors. From a tax-smart management perspective, TMIS leverage the inherent tax-efficiency of ETFs and contribute additional value with fully automated, systematic TLH. Replacing the harvested sector ETF with a similar proxy maintains the desired investment exposure in the sector while capturing the taxable loss that can be  used to offset capital gains, as shown in the example above.

Example: US Large Cap Index Strategy

As an example of TMIS implementation, here are the composite returns of TMIS accounts that have implemented a Large Cap Index strategy.

Total returns as of 6/30/20201

Chart showing example of US Large Cap Index Strategy

1 Please see the last page of this document for detailed disclosures on the composite returns shown.
2 Excess returns are defined as returns achieved above the return of the index.
3 S&P 500® after-tax returns are net of taxable gains/losses from 1) ongoing rebalancing and 2) any dividends paid associated with holding the index.


TMIS offer a simple implementation and better experience for both the advisor and client. Fully automated TLH is run throughout the year to capitalize on volatility and to realize harvesting opportunities when they appear, not just at year-end. TMIS are branded and customizable for the advisor.

Advisor Benefits: Control: Retain ownership of strategies, demonstrating differentiated value-add for clients, with simple implementation. Customization: Can tailor to existing asset allocation, blended indices, and multiple asset classes. Scalability: Fully automated approach can be utilized across an advisor’s client base for accounts $50k+. Ease-of-use: Digital solution enables streamlined process, including tax-smart transition. Potential Client Benefits: Better after-tax outcomes: Systematic TLH capitalizes on harvesting opportunities when they appear throughout the year. Accessibility: Sophisticated tax management available to accounts as small as $50k. Transparency: Simple client experience with limited number of ETFs. Flexibility: Advisor can modify strategies without exiting the account if investment objectives change.

Your Practice: Powered by 55ip

55ip is a tax-smart investment strategy engine that dramatically improves financial advisor efficiency and effectiveness. Our intuitive experience and intelligent automation elevate portfolio design and delivery. Advisors get the time savings of outsourcing, while retaining control of the decisions that make a difference for their clients. Clients get tax-smart, tailored investment portfolios that drive better client outcomes. At the heart of the experience is 55ip’s ActiveTax® technology, which includes tax-smart transitions, management, and withdrawals—enabling advisors to deliver differentiated value throughout the client journey.

Contact the Advisor Success Team at
617.960.9559 or to learn more
about how TMIS can help grow your practice.

Important Information
The composite information reflected herein is derived from eight accounts managed by the same adviser. The gross and net returns (net of 55ip fees of 30 bps and transaction costs) include cash held in the accounts. All taxes and tax benefits (i.e., tax savings) are expressed as a percentage of the account value using the average account value for the periods shown. Taxes were calculated using maximum capital gains tax rates of 40.8% for short-term and 23.8% for long-term, both of which include the 3.8% investment income tax. Dividend taxes for each account were calculated using the maximum qualified dividend tax rate of 20%, operating under the assumption that all dividends are qualified. Applying tax benefits to the current year assumes that the account holder has other capital gains against which they can apply harvested tax losses to offset the gains. To arrive at the after-tax return for the strategy, we take the pre-tax return less any taxes on dividends plus the net tax benefit, which includes any capital gains realized due to rebalancing the portfolio.

Past performance does not guarantee or indicate future results and there can be no assurance that any return objectives will be met. No representation is made that any investor will, or is likely to, achieve the intended results. All investments involve risk, including loss of principal.

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