In a financial landscape increasingly driven by client demands for efficient and sophisticated tax strategies, tax efficiency has become a crucial value-add for wealth managers. Tax Alpha—additional returns generated by implementing tax-saving strategies—is now a primary focus for advisors who want to maximize their clients’ after-tax wealth. Turnkey Asset Management Programs (TAMPs), especially those supported by comprehensive data integration platforms like Milemarker, provide the tools and structures that help advisors achieve this “Tax Alpha” through methods such as tax-loss harvesting, strategic rebalancing, and optimal asset location.

Milemarker enhances this shift by enabling RIAs, independent broker-dealers, TAMPs, and advisor platforms to better measure and showcase their tax alpha generation. Through unique data views, Milemarker integrates and verifies data from various bespoke systems, offering advisors and clients a clear measure of Tax Alpha across all levels. This article explores how TAMPs, complemented by Milemarker, empower advisors to maximize tax efficiency and add substantial value to client portfolios.

The Growing Importance of Tax Efficiency

Tax efficiency is now central to wealth management, particularly for high-net-worth clients who face complex tax considerations. According to McKinsey & Company, clients increasingly expect their advisors to optimize portfolios in ways that minimize tax burdens, seeing it as a key component of high-quality financial management (“The Future of Wealth Management”). As tax implications continue to impact investment returns significantly, TAMPs supported by platforms like Milemarker present a scalable way for advisors to deliver on these expectations by offering seamless data insights into tax-saving performance.

What is Tax Alpha?

Tax Alpha refers to the incremental return achieved by implementing tax-efficient investment strategies. It’s the value added when advisors use tax-efficient rebalancing, tax-loss harvesting, and other strategies to enhance after-tax returns without changing the portfolio’s overall risk profile. A report from Bain & Company highlights that tax-efficient strategies can generate 1-2% in additional annual returns for clients, underscoring the significant impact that Tax Alpha can have on long-term wealth accumulation (“Wealth Management in an Era of Wealth Transfer”).

Through Milemarker, advisors can track this Tax Alpha across portfolios and client segments, helping to validate and clearly communicate these added returns. By offering verified, data-driven insights, Milemarker not only simplifies tax reporting but also allows advisors to showcase the quantifiable impact of their tax strategies directly to clients.

How TAMPs Enable Tax Efficiency with Milemarker’s Support

TAMPs offer a suite of tax management tools that advisors can use to enhance client outcomes. By centralizing tax-sensitive investment management functions within a platform, TAMPs simplify tax optimization strategies, such as tax-loss harvesting, efficient asset location, and tax-aware rebalancing. When combined with Milemarker’s unique data integration capabilities, TAMPs allow advisors to deliver these strategies at scale, giving clients a clearer picture of the tax efficiency in their portfolios.

1. Tax-Loss Harvesting

Tax-loss harvesting involves selling securities at a loss to offset gains elsewhere in the portfolio, reducing the client’s taxable income. This strategy is especially effective in volatile markets, where fluctuations create opportunities to harvest losses while maintaining a balanced portfolio. According to Cerulli Associates, TAMPs streamline tax-loss harvesting by automating the process, making it more efficient for advisors to capture tax-saving opportunities (“U.S. Managed Accounts Report”).

With Milemarker’s support, advisors can measure these tax-saving actions through real-time data views that span across various systems and portfolios, allowing them to illustrate the exact impact of tax-loss harvesting on client returns. Milemarker’s verification processes ensure these tax alpha measures are accurate, providing transparency to both advisors and clients.

2. Tax-Aware Rebalancing

Rebalancing is crucial for maintaining a portfolio’s target asset allocation, but it can trigger capital gains taxes. TAMPs facilitate tax-aware rebalancing, making portfolio adjustments in a way that minimizes taxable events. InvestmentNews notes that TAMPs offering tax-aware rebalancing can account for factors like asset cost basis and anticipated tax liabilities, reducing the need to sell assets at a gain (“Tax-Aware Strategies in Wealth Management”).

Milemarker enhances this by pulling data from multiple systems to provide a verified and consolidated view of the tax impact of rebalancing activities. This enables advisors to track Tax Alpha outcomes from these tax-aware actions, ensuring that each rebalancing decision aligns with the client’s tax goals and the portfolio’s long-term strategy.

3. Asset Location Optimization

Asset location optimization is the strategic placement of assets in accounts where they will incur the lowest tax impact. For example, placing tax-efficient assets in taxable accounts while positioning income-generating assets in tax-advantaged accounts. TAMPs automate and manage this process, making it easier for advisors to maintain tax-efficient portfolios. According to McKinsey, proper asset location can improve after-tax returns by 0.5% to 1% annually, making it an essential tool for achieving Tax Alpha (“The Future of Wealth Management”).

With Milemarker’s data consolidation capabilities, advisors can access an integrated view of assets across all accounts, streamlining the process of determining optimal asset locations. Milemarker’s data insights make it simple to show clients how asset location decisions contribute to tax savings, allowing advisors to demonstrate the value of this strategy quantitatively.

Milemarker’s Role in Enhancing After-Tax Performance

As tax efficiency takes center stage, TAMPs have adapted to provide advisors with integrated tax solutions that go beyond traditional portfolio management. America’s Best TAMPs 2024 highlights that TAMPs offering advanced tax optimization tools are increasingly popular among advisors looking to differentiate their services and deliver added value to clients (“America’s Best TAMPs 2024”). With Milemarker, these tax optimization tools become even more impactful, as advisors can harness unique data views to better showcase Tax Alpha generation across client portfolios.

Through Milemarker, advisors can measure and verify tax efficiency in real-time, providing data-driven insights that resonate with high-net-worth clients. By integrating data from bespoke systems and creating unified tax alpha reports, Milemarker empowers advisors to provide proactive, transparent tax management that enhances client trust and satisfaction.

Technology and Tax Efficiency: The TAMP and Milemarker Advantage

The ability to create Tax Alpha relies heavily on technology, as managing tax implications across multiple accounts and strategies requires robust automation. McKinsey notes that TAMPs equipped with machine learning and AI-driven analytics can better identify tax-saving opportunities and recommend tax-efficient adjustments (“The Future of Wealth Management”). Milemarker complements these capabilities by integrating data across multiple platforms, allowing for customized, data-rich reporting that highlights the tax efficiency achieved for each client.

Milemarker’s advanced data model further supports advisors by delivering real-time insights into client tax savings, simplifying both measurement and demonstration of tax efficiency. As TAMP technology evolves, Milemarker’s integration offers a valuable layer of flexibility, enabling wealth managers to adapt their tax strategies to changing regulations and client needs while delivering consistent, verified Tax Alpha.

Conclusion: Why TAMPs and Milemarker are Essential for Tax-Efficient Wealth Management

For wealth managers aiming to deliver enhanced after-tax returns, TAMPs and Milemarker together provide the tools needed to generate and demonstrate Tax Alpha. From tax-loss harvesting and tax-aware rebalancing to asset location optimization, TAMPs make it easier to implement tax-efficient strategies at scale. Milemarker amplifies these efforts by consolidating data across bespoke systems, verifying the tax efficiency of advisor strategies, and providing accessible insights into the quantifiable impact of tax-saving efforts.

By leveraging Milemarker, advisors can deliver a proactive, data-driven tax strategy that aligns with clients’ financial goals and reduces tax liabilities. The ability to measure and communicate Tax Alpha not only helps advisors differentiate their services but also provides clients with a clear view of the added value in their wealth management plans. Through its unique data views and verification capabilities, Milemarker ensures that advisors can make tax efficiency a central part of their value proposition, empowering clients in their pursuit of wealth preservation and growth.

Works Cited

• Bain & Company. “Wealth Management in an Era of Wealth Transfer.” Bain & Company, 2022, www.bain.com/insights/wealth-management-in-an-era-of-wealth-transfer

• Cerulli Associates. “U.S. Managed Accounts Report.” Cerulli Associates, 2023, www.cerulli.com/reports/us-managed-accounts-report

• InvestmentNews. “Tax-Aware Strategies in Wealth Management.” InvestmentNews, 2023, www.investmentnews.com/tax-aware-strategies-in-wealth-management

• McKinsey & Company. “The Future of Wealth Management: Building a Better Client Experience.” McKinsey & Company, 2023, www.mckinsey.com/industries/financial-services/our-insights/the-future-of-wealth

•The Wealth Advisor. “America’s Best TAMPs 2024.” The Wealth Advisor, 2024, www.thewealthadvisor.com/americas-best-tamps-2024.