Today we’re announcing the release of our new white paper “3D Active Tax Management.” In it, we cover what’s truly unique about our approach to tax management, and why advisors and investment teams should take note.
Some Key Takeaways
- Considering the full spectrum of investor values: Values-aligned investing isn’t just about making an impact; it integrates investment decisions, risk management, and tax efficiency to align with each investor’s deeply held values.
- Tax management: Unlike conventional tax management, our Active Tax Management seeks to enhance after-tax savings while keeping portfolios aligned with investors’ risk, impact, and mission goals.
- Our platform enables personalized portfolio optimization: Ethic actively monitors portfolios daily, automating transitions and optimizing tax-aware strategies to help navigate complex trade-offs and maximize long-term financial and impact goals.
Wealth advisors know that taxes can make or break long-term portfolio performance. But when you add impact and tracking error considerations into the mix, managing tax while aligning with a client’s impact goals becomes even more complex.
That’s why we created Ethic’s new white paper “3D Active Tax Management.” This work is valuable for both advisors and investment teams because it helps showcase the ways Ethic partners with clients to strategically optimize for impact, tracking error, and taxes—the three key dimensions we believe are core to values-aligned investing.
"3D Active Tax Management" explores the trade-offs of tax-efficient, values-aligned investing and showcases the practical techniques we employ to manage those challenges, like tax-loss harvesting, specified lot selection, and in-kind transitions.
The Value-Add
Traditional tax management strategies weren’t designed for the complexities of values-aligned investing—but that presents a significant opportunity for advisors. As the investment landscape evolves, advisors who integrate more sophisticated, personalized tax strategies can differentiate their practice and deliver greater value to clients.
For example, transitioning away from misaligned holdings has often been seen as a tax challenge. But with a strategic approach, it becomes an opportunity to enhance both tax efficiency and impact alignment. Gradual divestment strategies allow advisors to reduce tax liabilities while steadily realigning portfolios with client values—ensuring that tax-smart decisions and impact goals go hand in hand.
Other key solutions covered in the paper include:
- Tax-aware rebalancing—Ensuring efficiency and a thoughtful approach to tax cost in portfolio realignments.
- Holistic portfolio optimization—Examining the entirety of a client’s portfolio, including ETFs, mutual funds, and direct equity, to enhance tax efficiency.
- Philanthropic tax strategies—Exploring how DAFs or other vehicles can help clients maximize impact while reducing their tax burden.
Advisors who want to help clients achieve both their financial and impact goals need a new framework for tax management.
Download 3D Active Tax Management to explore how tax optimization can be a powerful tool for values-aligned investing.
