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Financial Planning > Tax Planning

Separate and More Than Equal

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Placemark Investments recently unveiled a turnkey investment product designed to help advisors offer their separate account investors the ultimate tax efficiency.

TOTAL, or Tax Optimized Total Asset Link, is offered through advisors and was introduced last October. It combines individual ownership of securities and active asset management with real-time analysis of multiple equity portfolios and non-portfolio assets to convey a complete picture of a client’s tax situation. The information is then analyzed by the TOTAL Optimization Engine to gauge the appropriateness and timing of decisions to buy and sell equities across the portfolios.

“The majority of managers give up more to taxes than they can reasonably be expected to make from active investment management,” says Lee Chertavian, CEO of Boston-based Placemark. “Yet we as an industry have, until very recently, focused all our attentions on picking the right stocks, but not thinking about the tax implications of the different buys and sells that we make.”

Chertavian says recent research shows that mutual fund investors lose as much as 2.5% to 3% annually in taxes, while investors in separate accounts give up only 1% to 1.6% each year in taxes.

Placemark,, acts as the registered investment advisor while TOTAL partners advisors with top separate account managers like Nicholas-Applegate Capital Management, Loomis Sayles, First Quadrant, and Rittenhouse. The Atlanta-based brokerage/planning firm JP Turner recently signed on with Placemark, and Chertavian says 20 or 30 more similar deals are in the pipeline. Advisors can also use TOTAL for trading, custody, and clearing services. For firms that want to use their own infrastructure, the service can be integrated into their back office. TOTAL can also be private-labeled. “Let’s say an advisory shop with 300 planners wanted to offer [TOTAL] for all its planners. We can private label our front-end interface for them; we can embed it into their desktop.”

Chertavian’s goal is to add 10 advisory/brokerage firms to the TOTAL platform by year-end. He’s targeting firms that have an average of 300 planners. “We are looking at [firms] that will give us by the end of the year 3,000 to 4,000 planners on the system.”

TOTAL provides the ultimate tax efficiency, Chertavian says, through the proprietary Optimization Engine, which analyzes the tax effect of buying and selling securities within each account; examines the effect of those decisions across multiple accounts; and incorporates into the analysis tax data on non-portfolio assets, including self-directed investments in stocks, bonds, and real estate.

Chertavian says he wants to debunk the myth that all separate accounts are tax efficient. “That’s one of the big secrets of the industry that no one likes to talk about,” he says. “They’re designed to be [tax efficient], but if you are an investment manager and you have a $100,000 account, you’re getting 40 basis points for that account so you’re getting $400 a year to manage that account. How much time are you going to spend on that account? You can’t spend individual time on that account, and make decisions differently for that account than the others. If you go to any of the major brokerage houses and ask to look at a sample of 100 accounts managed by Invesco, for example, all 100 of them will look exactly the same or nearly identical. And they shouldn’t; that’s a bad tax answer for people.”

With TOTAL, Chertavian says, the advisor is continually inputting client tax information as it changes. “Let’s say the advisor’s client takes a $100,000 capital gain on employee-owned stock that he held. We can input that into our process and help to optimize and shelter that gain,” Chertavian says. “Or if the client knows he is going to need a distribution of cash come April 15th to pay his taxes, it’s better to plan for that over six months rather than wait until April 14th to liquidate some [holdings]. There’s a whole bunch of different settings [within TOTAL] that the advisor can use to help minimize the client’s tax exposure.”


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