The Wealth Advisor’s article on Smartleaf Asset Management’s (SAM’s) unified managed household offering, together with Scott’s interview with SAM’s President, Jerry Michael.
Smartleaf Asset Management (SAM) recently announced its groundbreaking unified managed account (UMH) sub-advisory offering, in which SAM will jointly manage accounts in a household to a common asset allocation, and do so in a tax-optimized manner, with documentation of the taxes saved or deferred. The service is currently offered to advisors who custody at Fidelity, Schwab and Axos, and to trust banks using common trust accounting systems. You can read more about SAM’s offering here.
Jerry Michael, President of Smartleaf Asset Management (SAM), recently spoke with the Wealth Advisor’s Scott Martin, about SAM’s (UMH) sub-advisory service.
You can read Scott’s article in Wealth Advisor below:
While unified managed householding (UMH) technology has remained an elusive promise for most TAMP providers, Smartleaf Asset Management (SAM) stands apart by delivering true automation of tax-optimized portfolio management at the household level. Through sophisticated technology, comprehensive tax management, and a commitment to removing operational barriers, the firm has established itself as a leading turnkey asset management platform that can transform advisor capabilities without adding complexity.
In an interview with the Wealth Advisor’s Scott Martin, Jerry Michael, President of SAM, discussed how the company’s groundbreaking automation technology is shaking up the TAMP landscape by transforming household-level tax management, freeing advisors to focus on client relationships while delivering measurable tax alpha across entire households—accomplishing what many firms have promised but few have achieved.
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You can watch a video of the interview here. And below is a transcript, lightly edited for brevity and clarity.
Transcript:
Scott Martin (SM): This is Wealth Advisor TV. I'm Scott Martin, and I'm always on the hunt for America's Best TAMPs. One of those names, you know already: Smartleaf and it’s President and Co-Founder, Jerry Michael, who built the company from the ground up and has been with it ever since. Mr. Michael, thank you very much for being here today.
Jerry Michael (JM): John, it's a pleasure.
SM: There are a lot of would-be technocrats in this business, but you are a true data scientist and you've seen it all. You've made a fairly aggressive pivot to the unified managed household recently. Why now, and why is what Smartleaf is doing truly the solution to those problems?
JM: Smartleaf is a technology for automating tax-optimized and personalized management. Lots of people use the word automated. We mean it.
Last year, three-quarters of our clients did not alter or modify our recommended trades for highly personalized tax-optimized accounts for a single account once in the entire year. We are at that level of automation.
We have focused in the past on doing this at the account level. It’s everything you can think of – tax loss harvesting, gains deferrals, tax optimized, multiyear, tax-sensitive transitions – all automated. We have moved now towards doing the same thing, of tax optimization, at the household level.
SM: I've been hearing about the unified managed household for at least a decade now. People say they do it, but in your opinion, what have they not actually delivered until Smartleaf made this possible?
JM: The cutoff is simply time. It's not knowledge. Everything I've said has been around. But as a practical matter, to actually do this, there are no tools to combine the holdings and compare it to a single asset allocation. To discover when you combine all the holdings across your household, you're overweighted in real estate, underweighted in mid-cap. So even that step is largely manual.
Often, you import various holdings into Excel and do some comparison. And then everything I described about stepping through the accounts, first sell at a loss in the taxable accounts, then sell in the qualified accounts, and then sell at a gain in the taxable accounts, but even then figure out where the least gains are. That's just hit and miss matter of looking at the account. So it gets done. But if you weren't ultra-high net worth, you weren't getting it done right.
The real change here is there's no barrier. There’s no compromise. You can provide the optimal solution to every single client.
SM: Every single client. And I'm sure the compliance team enjoys that, not only for the the uniformity of service, the reliability, the predictability, but also just simply, if it's automated, I was following the system. And that's what the system gave me.
JM: Absolutely. There's that consistency and compliance. There's also nimbleness.
If a firm, at the household level, determined that they would like to overweight small-cap relative to large-cap, that can be implemented across every account and every household in one business day. They have that level of control.
If the markets go crazy, we're back to March 2020, and you want to rebalance every single client because there's loss harvesting to be done in every single one of them, you can rebalance your entire book of business in a single day. You get that level of control and possibly the single biggest benefit: the investor-facing adviser doesn't have to spend any time at all doing it. They're completely free from having to spend time reviewing, rebalancing, and trading portfolios. They can spend all of their time with clients.
SM: It is really elegant, really beautiful, and onboarding does not take a whole lot of time.
JM: No. It's relatively straightforward to set up an account, and there is no operational barrier.
That is to say, if you want a direct index, there is no difference operationally between selecting a direct index or an ETF for a client. There's no additional time up for the adviser. There's no additional time for the firm. There's no additional time if you want to have a social screen or a religious value screen. It's operationally identical. There's a tax sensitive multi year transition. It's no harder than not doing a multi year tax sensitive transition. Year round tax management is no harder than not doing it.
The end result of this is we're not telling people you should use direct indexes or you should do any of this. We just wanna make sure that operational complexity or operational barriers are never the reason you're not doing it. The only reason to do something or not do it is whatever you think is in the best interest of your client.
SM: Mr. Michael, Smartleaf, always one of the great visionaries of our space. Thank you very much, sir.
JM: Scott, it's been a pleasure.
Questions? Comments? Want to learn more? Drop us a line. You can email us at questions@smartleafam.com.