Transition Strategies

  • When high net worth clients approach their financial advisor seeking new investment solutions, they rarely start with a portfolio exclusively in cash. Wealthy clients most often have built portfolios of securities and funds over time and quite often have deeply embedded gains. Many wealthy clients have built wealth through stock options or grants. These "legacy assets" can make it difficult for the financial advisor to implement an appropriate solution. Balancing the tax impact of selling existing investment products and securities against the risk inherent in holding concentrated positions is complex. For these clients, Placemark has developed a proven process to:

  • icon green arrow Analyze a client's current holdings based on the client's individual tax situation and the risk characteristics of the individual securities held.
    icon green arrow Offer multiple paths to a solution based on the individual client's goals and the holdings and risk characteristics of available separate account managers.
    icon green arrow Implement a highly customized transition strategy that allows the advisor and client to control the recognition of and type of gains in the client's portfolio over time while migrating the client to a more suitable solution.

    The Proposed Asset Transition Summary (PATS) compares the individual stocks the investor currently owns with the holdings of the proposed portfolio solution. However, unlike traditional overlap analysis, PATS also takes into consideration how much the client paid for each stock and when it was purchased.The extra level of analysis allows us to more accurately determine the potential tax impact of a transition.

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PATS reports are divided into four sections:

Summary
Page		 Provides a snapshot of the current tax scenario in the client's portfolio and indicates the estimated tax resulting from the transition.
Original Portfolio Displays the current portfolio that will be transitioned.
Shares to Transition Reveals the securities that may be retained and allocated within the new portfolio.
Shares to
Sell		 Reveals the securities that may be sold as part of the transfer to the new portfolio.


When is a PATS analysis appropriate?

The PATS service is appropriate for tax-sensitive clients holding large, mostly equity, investment portfolios with significant unrealized gains. The following criteria should be considered to determine whether a PATS analysis is appropriate:

icon green arrow The value of the account is greater than $250,000
icon green arrow The extent to which the portfolio composition consists of mostly equities
icon green arrow The relative size of unrealized long-term gains (generally >15% of portfolio)
icon green arrow The client may be subject to AMT
icon green arrow The client has considerable realized gains outside of the account

PATS is a very effective transition service to assist advisors in providing more appropriate solutions for new and prospective clientswho have historically felt locked into existing portfolio strategies as a result of significant unrealized gains and the tax bill resulting from the forced recognition of those gains. Providing clients and advisors with greater control of the recognition of gains is a major benefit of working with our unified managed accounts.