Wealth management has embraced investment models because of their scalability and efficiency. However, client demand for personalization and tax management are significant headwinds.
Models are straightforward, typically comprised of mutual funds and ETFs, and periodically rebalanced to track a risk benchmark. But to address personalization and tax concerns effectively, individual securities, like direct indexing, are necessary. For instance, while ETFs are tax-efficient vehicles, they do not allow for harvesting single stock losses, they cannot be personalized and are difficult to manage around concentrated stock positions.
At EVO, we believe a new solution: the building block approach, will displace traditional models. Building blocks enable financial advisors to select from interchangeable portfolio components. An example is choosing between funds or individual stocks for large cap US equities. Technology can deliver this in one single account and makes this process as easy as selecting a traditional model.
For High-Net-Worth clients, models lack the necessary precision to align with their complex and evolving financial needs. Technology updates the precise allocations of the building blocks any time there are meaningful changes in the financial plan, account values or the advisor’s market outlook. A tax budget limits trading to optimally align the client portfolio to the new target, without generating unexpected tax costs.
The tech is not new, but recent advancements in data, infrastructure and custodial platforms have made this building block approach viable and cost-effective.
To learn more about how building blocks and technology can deliver scalable and personalized client experiences, visit www.evo-wealth.com to access additional content or schedule a meeting with our team.
