WisdomTree & 55ip: The Quest to Create Tax-Efficient Model Portfolios

Model portfolio strategies can help savvy financial advisors navigate tumultuous market conditions, leaving them with more time to engage with clients and better-manage their businesses.

WisdomTree offers one of the industry’s most expansive lineups of model portfolios, which include WisdomTree ETFs and products from other issuers. Often, capital gains issues prevent clients from accessing more compelling strategies, including model portfolios, but WisdomTree is partnering with 55ip to solve that riddle.

“55ip was founded by a team of leading academics, researchers and technologists with the mission of improving financial outcomes for everyone,” writes Ryan Krystopowicz, WisdomTree associate director, product solution strategist – model portfolios. “At the heart of 55ip’s value proposition is its ActiveTax Technology®, which includes tax-smart transitions, investment management and withdrawals—enabling advisors to deliver differentiated value throughout the client journey. This tax management technology provides investors and advisors with access to modern investment science previously reserved for institutions.”

The Benefits of Tax-Efficient Model Portfolios

ETF managed portfolios are investment strategies that hold more than 50% of assets invested in ETFs. They represent one of the fastest-growing segments in the separate accounts space. The portfolios typically offer three major investment themes: tactical, strategic, and hybrid mix. The tactical offerings provide short-term plays to capitalize on investment opportunities that are forming, whereas the strategic play provides long-term allocation across sectors and asset classes. Naturally, the hybrid mix includes a combination of tactical and strategic elements.

Tax efficiencies, when properly realized, can really add up. Data suggest that the WisdomTree/55ip collaboration is already onto something.

“2020 was a difficult year for many reasons—one of which was market volatility. The upside to market volatility is that it can create opportunities for tax loss harvesting,” says Krystopowicz. “Using real accounts on 55ip’s state-of-the-art technology platform, the average tax savings (or “tax alpha”) per account was 2.41%, which translated to more than $13,600 during the first half of 2020.”

Investors with assets in model portfolios are significantly more likely to agree that their advisor understands their goals, that they trust their advisor, and that their advisor is an integral partner in their financial life.

“Outsourcing to third-party Model Portfolios is one of the most transformational trends in wealth management today,” adds Krystopowicz. “For many advisors, the question of migrating to a third-party model is not why but how. Our collaboration with 55ip helps minimize the tax impact of moving clients from their existing portfolios into WisdomTree models, so advisors can get back to focusing on their clients’ goals and adding value without worrying about their tax bill.”

For more on how to implement model portfolios, visit our Model Portfolio Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.