Tax-efficient transition of a low-basis portfolio

Advisor’s prospective client had $37MM in low-basis stocks spread across nine managers. Aperio conducted a transition analysis by tax lot helping the advisor tax efficiently re-allocate $20MM and win the client. 

Challenge

An independent advisor had a prospective client with $37MM in low-basis stocks within a broker-dealer wrap program. Client was reluctant to choose the new advisor given the tax costs associated with re-allocation. Combined portfolio contained 405 securities. Four concentrated positions represented 21% of his wealth. Liquidating the portfolio would have caused an estimated $2.2MM in taxes. The advisor also wanted to re-allocate some assets to alternative investments and fixed income.

Aperio solution

Aperio prepared six different tax-efficient transition scenarios for the advisor within 48 hours. 
Aperio gathered all the tax lot information from the advisor for the nine SMA managers. The tax lots were analyzed on whether they should be sold or held and incorporated into a portfolio to track the chosen benchmark, the Russell 1000.  We presented six scenarios with different amounts to be withdrawn for re-allocation and different total tax costs. Aperio refined the scenarios with the advisor over several phone conversations.