April 20, 2011

Trends in Separately Managed Accounts: Tax Loss Harvesting on the Rise

Jacob Gold uses SMAs in the taxable environment to a considerable competitive advantage

If you haven’t seen Jacob Gold on one of the cable business shows, you probably don’t own a television. The president and CEO of Jacob Gold & Associates in Scottsdale, Ariz., is the ubiquitous, go-to guy when the advisor view needs representing. He isn’t afraid to tell you what he thinks, which when combined with his energy and (sometimes overwhelming) enthusiasm, makes him a booking agent's dream.

Jacob Gold“Every person’s needs are different, and separately managed accounts are just one arrow in our quiver,” Gold (left) says. “But it’s a big arrow, and when a client begins to speak about wants and needs, we really begin to think about the SMA that would be the best fit.”

Gold finds value with SMAs in the taxable environment, especially. The benefits of tax loss harvesting that SMAs provide allows Gold to be more tactical with his clients’ tax issues.

“Make no mistake; SMAs still have value within an IRA and in other non-taxable platforms,” he says. “But significant value is realized when we maximize losses our clients might have suffered when they were with other advisors.”

What about a recent survey that found only 14% of advisors maximize the tax loss harvesting capabilities inherent in the product?

“More and more advisors are using technology to address that issue. Traditionally, the advisor had to go in and harvest each loss account by account. Now, because of advancements in technology, they can do it on a more macro-level, sometimes with just the push of the button, so this is leading more advisors to take advantage of the benefit, especially with all the unrealized losses from 2008 and early 2009.

The real advantage, says Gold, is that a person truly has their own cost basis.

“The client owns their own gains and losses. Getting into a large mutual fund means they might be liable for imbedded unrealized gains, even if they didn’t own the fund at the time those gains were realized. That doesn’t happen with SMAs. New technology means more advisors will begin using them, and will maximize their benefits for the client.” 

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