Envestnet | PMC Rolls Out Tax Management Service for Mutual Fund & ETF Model Portfolios

New offering--powered by Aladdin® technology--seeks to manage tax exposure & improve after-tax returns for FSP accounts invested in mutual funds & ETFs, all year long

Chicago, Sept. 29, 2021 -- Envestnet | PMC (PMC) announces the rollout of its Fund Strategist Tax Management Service, enabling financial advisors to seamlessly manage the tax consequences of fund strategist portfolio (FSP) accounts, in either third-party manager or proprietary home office mutual fund and exchange-traded fund (ETF) models, in accordance with their clients' investment goals. The new offering applies to all model portfolios available through Envestnet's Fund Strategist Network, consisting of more than 140 strategist firms and over 2,000 portfolios. 

"For many investors, capital gains taxes are the largest expense in their portfolios. Our Fund Strategist Tax Management Service makes it easy to manage capital gains tax liability for clients invested in fund strategist portfolios all year long, in an automated and continuous way," said Erik Preus, CFA, Managing Director of Envestnet | PMC. "With this offering, we have addressed the tax-related headwinds traditionally associated with outsourcing advisor-as-portfolio-manager accounts to third-party institutional managers. Now, instead of having to liquidate account holdings right away upon investing in an FSP, regardless of the tax consequences, we can help advisors potentially manage their clients' tax costs according to individual investment goals."   

PMC's Fund Strategist Tax Management Service, powered by an integration with Aladdin technology to help advisors optimize portfolios, calculates the potential tax implications of adding the service either to an existing account, or moving client assets from an existing portfolio to a new model portfolio, on the Fund Strategist Network, based on three possible levels of tax sensitivity. Depending on the selected tax-sensitivity level—Moderate, High, or Very High—the service will estimate tracking error to recommend trades that would balance a client's tax cost with portfolio risk. 

"Tax management is a key value-add for helping investors achieve financial well-being," said Venu Krishnamurthy, Co-Head of the Aladdin Wealth Tech business at BlackRock. "We are glad to see a pioneer like Envestnet meet critical advisor needs for at-scale personalization using the Aladdin platform's powerful engines."

Beyond the initial model purchase, the Service provides ongoing value by managing to the client's tax sensitivity. When the model manager modifies an FSP's asset allocation or underlying funds, it may require the client to sell some holdings in their FSP account to buy others, leading to the possible realization of taxable gains. As part of this Service, PMC will evaluate the tax cost of executing those adjustments against other possible trades, and their expected tracking error, and may make trades that differ from the model if they reduce the client's realized gains and are appropriate based on the client's indicated tax-sensitivity level.

The Fund Strategist Tax Management Service was developed in response to feedback PMC has received from advisors. While many of these advisors want to move more client assets into model portfolios, they are often prevented from doing so because their clients hold low-cost-basis individual equity or mutual fund shares. The high tax bills resulting from transferring these holdings to model portfolios would be detrimental to clients, often causing their advisors to forego the broader benefits that model portfolios can bring to their practice and clients in the long run.

"Managing a client's portfolio while ignoring tax liabilities can derail an otherwise sound investment strategy," said Dana D'Auria, CFA, Co-Chief Investment Officer of Envestnet.  "Across the Envestnet organization, we are committed to providing tax-managed solutions that help advisors create a hyper-personalized, holistic wealth management experience where capital gains taxes can be managed throughout the year, and mitigated in line with every client's specific circumstances and goals." 

Envestnet | PMC, which has more than 15 years of experience focusing on tax-efficient investing, automates Tax and Impact Overlays for more than $10 billion in client assets at more than 100 firms, as of June 30, 2021. To learn more about PMC's Tax Overlay Services, including the Fund Strategist Tax Management Service, please contact PMCOverlayServices@envestnet.com

About Envestnet

Envestnet refers to the family of operating subsidiaries of the public holding company, Envestnet, Inc. (NYSE: ENV). Envestnet is transforming the way financial advice and wellness are delivered. Our mission is to empower advisors and financial service providers with innovative technology, solutions and intelligence to make financial wellness a reality for everyone. Nearly 108,000 advisors and more than 6,000 companies including: 17 of the 20 largest U.S. banks, 46 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of FinTech companies, leverage Envestnet technology and services that help drive better outcomes for enterprises, advisors and their clients.

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