growing your practice using separately managed accounts (smas) · 2016-07-27 · growing your...

Growing your practice using Separately Managed Accounts (SMAs)

For advisor use only. Not for inspection by, distribution or quotation to the general public. Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment advisor. © 2016 Ameriprise Financial, Inc. All rights reserved.

Session agenda

• Features and benefits of SMAs

• Industry Overview

• Overview of Managed Accounts SMA solutions

• Tax harvesting

• Resources

2 For advisor use only. Not for inspection by, distribution or quotation to the general public.

Mutual Fund

ETF

3

What is an SMA?

A portfolio of securities owned directly by the investor that is managed by a professional investment manager for an asset-based fee

For advisor use only. Not for inspection by, distribution or quotation to the general public.

Mutual Fund

ETF

4

Features and benefits of SMAs

• Customized portfolios

• Professional management

• Personalized tax management

• Lower more transparent costs


What are Unified Managed Accounts?

Overlay

Mutual Fund ETF

SMA

Overlay

Management


Single fee-based account

Single Registration

6 Source: FundFire July 2015 “Spotlight on SMAs”

Tax Management Techniques

40%

Tax Harvesting 44%

Tax Management Overlay

15%

How Advisors Use SMAs for Tax Management


Tax Management- A Major Driver of SMA Use

7

3 Reasons SMAs are in Demand 1. Fostering Deeper Client Relationships

2. A Scalable Solution

3. Opportunity for Recurring Revenue


8

Managed Accounts SMA solutions


Select Strategist

Investor Unified

Investor LDA

Vista

Select Separate

• 80+ SMA investment strategies - wide range of equity and fixed income strategies

• Minimum account sizes: $100,000 or $250,000

• Supported by Investment Research Group’s due diligence and research tools

Select Separate Account


• 425 SMA strategies, 1,100+ advisory share mutual funds and 200+ ETFs

• Proposal based • Minimum account - $100,000 • Recommended household - $1 million

Vista Separate Account through Envestnet


• 200+ SMA strategies, 1,100+ advisory mutual funds and 200+ ETFs

• Proposal based • Model portfolios • Overlay management • Minimum account - $250,000

Investor Unified Account through Envestnet

Overlay

Management

Mutual Fund ETF

SMA

Overlay

Management


Two series of portfolios – each with five risk tolerances • Select Strategist UMA Portfolios - Tax Sensitive - $500,000 • Select Strategist UMA Portfolios - $250,000

• Driven by dynamic asset allocation; investing in opportunistic managers • Traditional equity SMA exposure ranging from 15% to 60% • Investment objective is growth with a time frame of four years or more • Opportunity for monthly trading

80

12

Select Strategist UMA Portfolios


Select Separate Account (including Select Strategist UMA Portfolios) • Investment Research Group (IRG)

- Research List - Quarterly Strategy Review Reports - Strategy Profiles - Quarterly Strategist Updates

• Sales Proposals

Vista Separate and Investor Unified Account

• Portfolio Management Consultants (PMC) • Research tool

SMA Manager selection and monitoring


For advisor use only. Not for inspection by, distribution or quotation to the general public. 14

Sample $2,000,000 Moderate portfolio

Select Strategist UMA Moderate Tax-SensitiveRiver Road All Cap Value

Oak Ridge All Cap Growth SMA

Logan Capital International SMA

Nuveen Muni Bond Ladder 1-10 Year SMA

Wells Fargo Advantage InternationalBond FundGoldman Local Emerging Market IncomeBond Fund

35 %

12 % 13 %

12 %

5 %

19 %

4 %

• With tax gain/loss selling, you are creating a taxable event • Can occur throughout the year • The investment manager will review the account which could result in

numerous positions being sold to reach the amount requested. • Upon sale of security at a loss, the proceeds will be invested in an

ETF or cash for 30 days depending on the discretion of the investment manager.

• Withdrawals from the account could cause the manager to rebalance the portfolio, which could generate new taxable gains or losses.


Tax harvesting

15


Short-term capital loss (33%)

Maximum efficiency

Long-term capital gain (15%)

Short-term capital gain (33%)

Neutral

Neutral

Less efficient

Long-term capital loss (15%)

Taking tax rates into consideration

16

Analysis: Before After Short-term capital gains $7,500 $2,500 Federal tax $2,625 $875 Net Investment tax $285 $95 After tax income $4,590 $1,530 Tax Savings = $1,940

Mr. & Mrs. Wilson • $7,500 short-term capital gains • $5,000 unrealized short-term capital losses • 35% federal tax bracket • 3.8% Net Investment Income tax

This hypothetical example is provided for illustrative purposes only.


Tax Loss Harvesting of Equity SMA Example

• Review your clients’ non-qualified portfolios • Assist client in completing forms and then fax forms

to Managed Accounts Service Team at 1.612.547.2750.

• Requests must be received prior to December 9th.

• Managed Accounts Service facilitates the request. • Financial Advisors should not view, review or handle

the client’s tax preparation documents prior to their submission to the Internal Revenue Service


How to Execute Tax Gain/Loss Harvesting

Tax Gain/Loss Harvesting Identify realized gains – what do you have?


Identify unrealized gains – what is available?


Tax Gain/Loss Harvesting


Form 413046 – Client Request for Year-End Gains/Losses (Example)

• Sales material and training - AdvisorCompass® site > Resources > Product Solutions >

Managed Accounts • Tax Gains/Losses Harvesting forms

- eForms Manager o Active Opportunity ETF Portfolios® - 402512 o Select Separate Account – 413046 o Vista Separate and Investor Unified Account - 402446

• Managed Accounts Service Team - Account opening and service questions - 1.800.297.6663


Resources


Questions

Have clients review the Ameriprise® Managed Accounts Client Disclosure Brochure or, for a consolidated advisory fee, the Ameriprise Managed Accounts and Financial Planning Service Combined Disclosure Brochure, for a full description of services offered, including fees and expenses.

Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Ameriprise Financial, Inc. and tis affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

Asset allocation and diversification do not assure a profit or protect against a loss.

There are risks associated with fixed income investments, including credit risk, interest rate risk and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is more pronounced for longer-term securities.

Like real estate, REITs are subject to illiquidity, valuation and financing complexities, taxes, default, bankruptcy and other economic, political, or regulatory occurrences.

Equity investments are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees.

Disclosures


Strategies investing substantially in municipal securities and will be affected by tax, legislative, regulatory, demographic or political changes, as well as changes impacting a state’s financial, economic or other conditions. A relatively small number of tax-exempt issuers may necessitate the fund investing more heavily in a single issuer and, therefore, be more exposed to the risk of loss than a fund that invests more broadly.

Income from tax-exempt municipal bonds or municipal bond funds may be subject to state and local taxes, and a portion of income may be subject to the federal and/or state alternative minimum tax for certain investors. Federal income tax rules will apply to any capital gains.

Bond portfolio laddering does not reduce market risk, and the principal and yield of investment securities will fluctuate with changes in market conditions.

ETFs trade like stocks, are subject to investment risk and will fluctuate in market value.

Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment advisor.

© 2016 Ameriprise Financial, Inc. All rights reserved.

Disclosures



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growing your practice using separately managed accounts (smas) · 2016-07-27 · growing your...

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