A report released Monday by Backend Benchmarking finds that although many robo-advisors describe their tax-loss harvesting services similarly, meaningful differences exist among them.
Robo-advisor tax-loss harvesting is the automated sale of a client portfolio’s securities in order to incur losses to offset any capital gains or taxable income.
Backend Benchmarking’s report was based on a specific set of accounts its researchers tracked that were opened and funded at the same time and received monthly deposits.
They found that several robos stood out in executing their TLH strategies and providing some tax alpha to clients during the first half of this year.
TD Ameritrade turned over its portfolio 127% during the six-month period. Schwab and Wealthfront were close behind, having turned over their portfolios 124% and 110%, respectively.
Among other TLH providers, Axos Invest exhibited a turnover rate of 69%, Morgan Stanley 51% and Wealthsimple 37%. Betterment trailed with a more modest turnover rate of 25% “but was still very active in harvesting losses,” the report said.
Less impressive, the report said, were TLH accounts held at SigFig, Citizens Bank and UBS, which showed little or no activity during the first half.