BOSTON (TheStreet) -- With tax season in full swing, and in response to continued concerns affluent investors have about risks to their portfolios, Fidelity Investments is highlighting its Personalized Portfolios, which provide daily tax-sensitive investment management through a unified managed account.
The approach is touted as having the ability to look for opportunities daily and "deliver better after-tax returns by doing tax-lost harvesting throughout the year, not just at year-end."
Fidelity executives, citing internal research, expect taxes to be a more significant concern for investors in the coming years. A recent survey of affluent investors found demand for tax-efficient investing, ongoing market volatility and an ever-expanding array of complex investment products are driving the need for managed account products.
"When you talk to affluent investors, taxes are definitely a top concern," says Rich Compson, senior vice president of product management development for Fidelity's Managed Accounts Group, with nearly 28% saying it's a top concern in their household. "And even though some of the
increases from tax legislation have been postponed, there is still that looming worry out there that hose change may come into effect sooner rather than later."
"If you look at an affluent household, the more and more assets they have, the more of their assets are in taxable registrations because their retirement benefits tend to cap out in the amount they can contribute, so the impact of taxes on their investments is significant," he says. "
did a recent study that showed investors can lose up to 1% to 2% of their overall returns with taxes. And in a low-rate or low-return environment, that can be pretty important to the long-term longevity of their portfolio."
Of those investors who use a unified managed account, the single largest trigger that caused them to use the product was increased investment complexity or significant investment-related tax obligations (48%), according to Fidelity's research. Added to the mix is that these affluent investors didn't see an economic improvement any time soon, with 70% not having a positive outlook over the next 12 months.
Nearly 39% said they aren't sure where to invest for a good return and not lose money. Of those investors surveyed without a managed account, loss of control of their assets (56%) and lack of personalization (34%) are key concerns they have with such accounts.
Fidelity hopes the tax-managed UMA will satisfy the concerns, Compson says, by "bringing an institutional style of investing management to the individual investor."
"It offers daily risk and tax management down the lot level," he says. "We manage each individual account separately and look at the various tax and risk opportunities on a daily basis. We do that by systematically reviewing all the accounts every evening, and our investment team then goes in and takes a look at what accounts need reviewing on a daily basis."
Fidelity Personalized Portfolios combines investment vehicles including mutual funds, ETFs, and SMAs, managed by professional portfolio managers, in one account. Each client also has an assigned account executive, who acts as a liaison with specialists who can answer questions about time horizon, risk tolerance and tax situation to help set their asset allocation.
FPP was developed with Strategic Advisers, a registered investment adviser and wholly owned subsidiary of FMR. Strategic Advisers has provided tax-sensitive investment management services to Fidelity's individual and institutional clients for nearly 20 years and manages more than $87 billion for nearly 308,000 households.
The minimum account balance for the portfolios is $200,000. The advisory fee varies depending on asset mix, underlying portfolio holdings and securities used to fund the account.
-- Written by Joe Mont in Boston.
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