First and foremost, we hope you and your family are staying healthy and finding ways to embrace a new routine in these unprecedented times. We thank you and your staff for your efforts on the front lines, tirelessly helping investors grapple with the reality of this new economic climate while simultaneously helping them chart a new course to their investment goals.
We also appreciate the struggle inherent in balancing the needs of your clients while simultaneously looking after your employees’ well-being AND maintaining the health of the business you’ve worked so hard to build. We know that the days ahead will be difficult, particularly for those in the fee-based advice business. We are all making tough decisions as revenues are on the decline; whether it be headcount, services, or our overall business model. The next few months will be a defining moment for our industry. It’s also a good time to envision what your firm will look like 6 months, 1 year, 5 years down the road. We believe, strongly, that a platform helps keep costs isolated while giving advisors the time they need to dedicate to client relationships.
With that in mind, I wanted to share with you some of the ways we think advisors can put a positive spin on this environment. Below are some ways we’ve helped advisors brace for this challenging fee climate.
- Demonstrate Value from Tax Harvesting. We have opportunistically reduced clients' tax liability through active, rule-based tax harvesting. We have conducted hundreds of thousands of harvest trades reducing aggregate tax liability by over 30%. Adhesion Wealth advisors can share Tax Alpha reports showing this statistic and the value they’ve provided as a silver lining in this otherwise bleak investing climate.
- Transition from legacy holdings. We have aggressively accelerated accounts enrolled in our Tax Transition program. By harvesting losses and reoptimizing the associated transitional index, we’ve managed to move many clients from set-aside legacy holdings into fee-generating advisor-constructed portfolios. In addition, we have assisted many advisors in the process of liquidating expensive mutual funds and migrating to SMAs where tax overlay strategies may be implemented.
- Rebalance Across Managers and Asset Classes. For advisors who felt it appropriate, we have opportunistically rebalanced across asset classes to take advantage of buying opportunities into equities. For others, we have helped identify and implement low-cost and transparent hedging strategies.
- Tweak Drift Bands. For some advisors, we have widened drift bands for those who feel we are in a longer down-trending markets, while for others we have tightened them as a form of automated value-based rebalancing. We have also helped facilitate the aggressive use of dollar cost averaging
- Isolate the Source of Cash Distributions. For bear markets that are expected to recover, selling from underperforming equities can limit the upside of a rebound. Our rebalance methodology distributes client cash that might be used for emergency needs from better performing asset classes.
- Share Content – both with your Clients and your Staff. We have shared a vast library of content from hundreds of asset managers and several OCIO firms to help advisors make decisions and to share market updates and market perspectives with your clients
In addition, over the past few weeks, Adhesion Wealth has enhanced many of our processes and workflows to accommodate the needs of our advisory clients. We have been able to do much of this thanks to our parent company Vestmark, who stands ready to help in any capacity, restoring a level of continuity and sense of normalcy for our clients and our employees.
For many of our advisors, this current market turmoil serves as a stark reminder as to why they stopped running portfolio trading and administration in-house in exchange for redeploying their time, capital and human resources into client-facing activities.
We know you are focused on your clients and we are focused on helping enable you to do as much as you can for your clients in these difficult days. We stand ready to help where we can as you react to the market's recent volatility and downturn. Let us know how we can help.
By Barrett Ayers, President