Technology to Optimize the Tax-Loss Harvesting Experience: A Win-Win for Portfolio Managers & Clients

December is not just the holiday season, it’s also tax-loss harvesting season – the time of year when investors rely on their wealth managers to turn securities that have lost value into tax winners. Tax-loss harvesting allows investors to sell investments that are down, replace them with reasonably similar investments, and then offset realized investment income with those losses. As a result, less money goes to taxes so that more can stay invested.

In fixed income market cycles when interest rates are on the rise, tax-loss investing can produce significant tax savings. However, in today’s market characterized by ultra-low rates, tight spreads, and minimal losses, the 2020 tax-loss harvest will not yield a bumper crop. In fact, with few exceptions, investors face the contrary.

Technology: An opportunity to make tax-loss harvesting merrier

Irrespective of the magnitude of the tax saving opportunities, tax-loss harvesting is a top December priority for wealth managers. To them, it’s not just a fiduciary responsibility, it’s a way to build strong relationships as a trusted wealth management partner that proactively pulls out all the stops to maximize returns and reduce taxes.

Tax-loss harvesting has traditionally been anything but a holiday for portfolio managers. Rather, it’s been a mundane and time-consuming burden which requires analyzing each individual portfolio to pinpoint  securities valued at a loss, then identifying the highest yielding reasonably similar bond options to swap out – all while maintaining market exposure across the portfolio.

Fortunately, fixed income investment management technology is transforming the tax-loss harvesting experience – and it is a win-win for clients and portfolio managers alike.

Tax-loss harvesting discussions are a client touchpoint opportunity that wealth managers value and their clients appreciate – which places intense pressure on portfolio managers to complete the analysis in a timely manner. Market liquidity on the buy side transaction also drives fast turnaround, as liquidity can often dry up as the weeks go on. Yet current processes and limited capacity have made being proactive a near impossible challenge.

And, tax-loss harvest season comes at a time of year when a portfolio manager’s insights and skills could be better allocated to market analysis to finetune their 2021 strategies or supporting their business development team in closing year-end business. Or – an unimaginable luxury without an automated and scalable tax-loss harvesting solution – enjoying vacation time with family and friends during the holidays.

Automated tax loss harvesting with IMTC enhances your experience

IMTC’s innovative platform automates tax-loss processing at scale so that portfolio managers can analyze hundreds of accounts in minutes, rather than hours – enabling them to approach tax-loss harvesting proactively.

The platform’s rules-based decision support tool means fixed income wealth managers can optimize tax-loss swap processing in real time. It analyzes tax-loss swaps by identifying securities held at either a short-term or long-term loss and recommends bonds with similar characteristics from live offerings currently available on the street.

IMTC’s investment management software enables you to:

• Filter accounts to target based on strategy, deteriorating credit, net losses or more
• Generate tax-loss swap ideas across multiple portfolios at once
• Optimize portfolios accounting for compliance targets and easily promote as trade blocks

Portfolio managers can quickly identify accounts with tax-loss harvesting opportunities and optimize portfolios, accounting for compliance targets, for proactive wealth management with IMTC’s investment management software.

The Win-Win for Portfolio Managers and Clients

Automation empowers portfolio managers to make better decisions for their wealth management clients to ensure that their portfolios are optimized for tax advantages and future growth – proactively in a timely manner to minimize buyside liquidity risk.

It’s taking the stress out of December for wealth managers by enabling them to:

• Avoid the fiduciary fatigue of manual tax-loss harvesting across many accounts
• Recapture hours of time so it can be devoted to market analysis, business development support, and other value-added tasks
• Enjoy a holiday vacation with friends and family!

Why wait? Talk to IMTC about how technology can optimize the tax loss harvesting experience for you and your clients.

Technology is only as good as how it is used. IMTC is designed by and for fixed income professionals, empowering them to take action and make decisions quickly and accurately with real-time data and analytics capabilities. It allows you to future-proof your business; driving operational efficiencies, mitigating risk and delivering performance, to ultimately enable business growth.

This paper is intended for information and discussion purposes only. The information contained in this publication is derived from data obtained from sources believed by IMTC to be reliable and is given in good faith, but no guarantees are made by IMTC with regard to the accuracy, completeness, or suitability of the information presented. Nothing within this paper should be relied upon as investment advice, and nothing within shall confer rights or remedies upon, you or any of your employees, creditors, holders of securities or other equity holders or any other person. Any opinions expressed reflect the current judgment of the authors of this paper and do not necessarily represent the opinion of IMTC. IMTC expressly disclaims all representations and warranties, express, implied, statutory or otherwise, whatsoever, including, but not limited to: (i) warranties of merchantability, fitness for a particular purpose, suitability, usage, title, or noninfringement; (ii) that the contents of this white paper are free from error; and (iii) that such contents will not infringe third-party rights. The information contained within this paper is the intellectual property of IMTC and any further dissemination of this paper should attribute rights to IMTC and include this disclaimer.