BOSTON, Feb. 20, 2019 /PRNewswire/ -- LifeYield LLC, the leading cloud-based solution that facilitates tax-smart, risk-smart management of an investor's entire household portfolio, announced today it has unveiled the first-of-its-kind Taxficient Asset Location Swaps. With Taxficient Asset Location Swaps, advisors can provide clients with a step-by-step roadmap that shows how relocating assets can save significant tax dollars. The update is an enhancement to LifeYield's Taxficient Score®, which quantifies the tax efficiency of a household portfolio by assigning a score between 0 and 100 and then shows how to implement those changes to improve investor financial outcomes. The updated tool is available immediately for current and new subscribers.
"Many investors don't realize they are paying unnecessary taxes, largely because they own multiple accounts and products with different tax treatments managed by two or three advisors," said Mark Hoffman, CEO and co-founder of LifeYield. "Few households are coordinated in a tax-efficient way mostly because they are unaware of the value of, or don't understand the complexities of, Tax-Smart Asset Location. Taxficient Asset Location Swaps not only quantify the benefits of this approach but show a step-by-step roadmap for how to achieve tax savings over the near- and long-term."
Tax-Smart Asset Location is a strategy to save and earn more by optimizing the location of assets, as opposed to focusing entirely on asset allocation. LifeYield's research of millions of accounts in their database shows the average Taxficient Score is a 52 on a scale of 0-100, which indicates most households are half as tax-efficient as they could be.
"We not only provide the advisor and investor with the next best action to take, but we also quantify the benefit in dollars and cents of each step along the way," said Steve Zuschin, EVP, Head of Direct to Advisor Sales. "We suggest the specific trades needed to improve the Taxficient Score. And we provide a clear path by suggesting adjustments to the portfolio that quantifies the value of improved Asset Location, which improves after-tax returns."
LifeYield ran an example of a $1.2 million household with a 40% bond/60% equity asset allocation and found they could improve after-tax returns by 0.42% annually. This shows improvement of: $80,000 over the first 10 years; $155,000 over 15 years; and $270,000 over 20 years. But this process involves several trades and steps over time, a daunting task which financial advisors might find hard to justify. Taxficient Asset Location Swaps simplify the process by identifying and prioritizing next best actions based on the investor's objectives.
The first and most valuable Taxficient Asset Location Swap would be to:
- Sell the portfolio's $200,000 actively managed large cap position, which sits in a Taxable account.
- The cash from that sale would be used to make a $200,000 purchase in intermediate municipal bonds in the same taxable account.
- In order to keep the portfolio's target allocation, the next recommended step would be to sell $200,000 worth of taxable intermediate bonds out of the tax-deferred account, and
- With that cash, buy back the same actively managed large cap position.
These steps result in the portfolio maintaining its initial target asset allocation, but with these strategic location changes, the investor will have improved their Taxficient Score by 33 points and gained a $67,000 benefit over the next 15 years. Of the available $155,000 benefit the Taxficient Score identified, these first few trades realized a 43% improvement. For the advisor, breaking the process down into easy-to-understand steps makes the process much more approachable for any investor.
"Advisors tell us quantifying the value of Asset Location helps uncover held-away assets and clearly demonstrates the value of their advice as they make a quantifiable case why the investor will make and keep more money by consolidating assets. Before the Taxficient Score, this was always a theoretical conversation with investors. Now the value can be quantified in a meaningful way for the client. Improving after-tax returns requires considering the entire household by fixing the problems that are uncovered and requires all accounts in the household to be managed in a coordinated way. The Taxficient Score, and now Taxficient Location Swaps makes it clear and easy to understand why and how to implement improvements and quantify the benefit of each action for the investor," concluded Zuschin.
For more information on LifeYield, its Advantage Suite tax-smart optimization software, and the Taxficient score, please visit their website. To schedule time with a LifeYield representative to learn more about the new Location Swaps, please visit their demo calendar here.
LifeYield LLC, creators of the Taxficient Score®, is the industry innovator and leader in facilitating tax-smart, risk-smart household portfolio management. LifeYield's Advantage Suite enables financial advisors to provide a comprehensive, tax-aware view of a client's entire investment and insurance portfolio, including easy-to-use tools to engage clients so they make and keep more money, and achieve their financial goals.
Based in Boston and founded by finance and technology industry leaders, LifeYield believes that by leveraging digitally enhanced advice advisors can improve investor outcomes and enhance the value and experience of support goals-based wealth management strategies. For more information, please visit www.lifeyield.com.
SOURCE LifeYield LLC