What we do, who we serve and what makes us different. 

Why SmartleafAM?

“SmartleafAM” is short for Smartleaf Asset Management. We’re a subadvisor, but of a different kind. Our goal isn’t to beat the market. It’s to enable wealth advisors to provide every client, of every size, with exceptional personalization and tax optimization, while retaining control of asset allocation and product selection. 

So far, so good. But why SmartleafAM? Who do we serve and what problem are we solving?

So glad you asked.

First, who we serve: our clients are wealth advisors that are financial-planning centric. Their mission is to be their clients’ lifetime financial coach, the go-to person for whatever financial questions the client may have. What type of insurance should I have? Should I refinance my mortgage? Set up a trust? Our clients aren’t insurance agents, mortgage lenders or trust lawyers – and they don’t get compensated for insurance policies, mortgages or trusts. It doesn’t matter. They’re there to reduce stress and guide clients through financial decisions.

Second, the problem we solve: our clients seek to do two seemingly incompatible things: they want to offer exceptionally high levels of personalization and tax optimization, but they want to protect their client-facing advisors from having to spend time rebalancing and trading portfolios. SmartleafAM enables our clients to “have their cake and eat it too”, as it were: high levels of personalization and tax optimization for clients; zero time spent by client-facing advisors on day-to-day trading and rebalancing. 

That’s all for the good, but it raises the follow-on question of “why SmartleafAM, in particular?” What makes us different?

We do one thing – personalization and tax. Our input is roughly whatever you’re doing today. Our output is whatever you’re doing today, plus personalization (e.g. religious value and ESG constraints, custom cash management, replacing ETFs with direct indexes or active equity models) and tax optimization (e.g. tax sensitive transitions, year-round tax loss harvesting, risk-sensitive gains deferral, leveraging tax-advantage accounts in a household). We’re a subadvisor, but an unusual one. Unlike almost all others, we don’t lead with our security selection and asset allocation investment insights – in fact, except for how to implement personalization and tax, we don’t contribute investment insights at all. We simply implement the investment insights and investment choices of our clients, overlayed with whatever level of personalization and tax optimization they request. 

We manage holistically (without sleeves or subaccounts). Most subadvisors work within a traditional SMA structure, meaning each portfolio gets divided into multiple subaccounts (aka sleeves), and each subaccount gets handed to a different subadvisor. It’s up to the wealth advisor to manage asset-class rebalancing. In contrast SmartleafAM, as a subadvisor, doesn’t just manage one asset class. We typically manage the whole account, everything – every asset class, every asset type, proprietary and third-party models. And we do it holistically, without resorting to subaccounts/partitions/sleeves. This reduces cost, and, more importantly, it permits finer control of taxes and risk, which are properties of the portfolio as a whole, not individual sleeves. 

We’re still open architecture – you still have access to third party managers, if desired – but we implement third-party models without subaccounts or sleeves. 

We manage at the household level. For clients who have multiple accounts in their household, we can jointly manage the accounts in the household to a common household-level asset allocation. And we do it in a tax optimized manner, leveraging the qualified accounts as “tax free household-level asset-class rebalancing centers”.

We provide an advisor portal that offers real-time feedback and on-demand transition plans. Investor-facing advisors use our advisor portal to design personalized solutions for each client. The advisor portal is connected directly to our automated rebalancing analytics, so advisors can get real time feedback on the implication of their and their clients’ customization choices. When you choose, say, a tobacco screen, we’ll tell you instantly how much this will cost the client in taxes. And we’ll show you the impact the screen will have on tracking error (the ability of the portfolio to track its target). For clients who may wish to transition their portfolios over multiple periods, we’ll generate on-demand multi-year tax-optimized transition plans in a matter of seconds.

We make direct indexes as easy to work with as ETFs. With SmartleafAM, working with a direct index is literally as easy as working with an ETF – both are just choices on a pull-down menu. There’s no subaccount setup, no separate agreements, no cash transfers, no separate process for asset class rebalancing. 

We document the value we add through active tax management. We generate a report that enables advisors to document for every account the estimated amount they save or defer in taxes. The expectation is that, for most accounts, advisors will be able to document that they save or defer more in taxes than they charge in advisory fees. 

We analyze every portfolio every day. We don’t trade by the calendar. We look at every account every day for opportunities to improve the portfolio. We seek to reduce tracking error, implement an optimal strategy of loss harvesting, tilt the portfolio towards securities our clients rank highly, and ensure that we’re being faithful to investor security, religious value, ESG and cash constraints. And, of course, act on cash withdrawal requests. We’re aware when short-term positions go long term, when wash sale periods expire, when there’s a security swap in a model, when there’s a tactical asset allocation change, when there’s a change in security rating, and when there’s excess cash. And we don’t need to wait until the next rebalancing cycle to act on this information. We can trade whenever it is beneficial to the account to do so.

So, why SmartleafAM? SmartleafAM enables wealth advisory firms to provide every account with expert personalization and tax management, while enabling their client-facing advisors to spend more time with clients and prospects. That’s the nuts and bolts. But there’s something deeper than this. We enable the firms we work with to execute on their vision of what wealth management should be. We enable wealth advisors to focus on what they do best: building relationships of trust with clients, helping them to lead richer lives (in every sense of the phrase).

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1. However, they often work closely with insurance agents, mortgage lenders, trust & estate attorneys, and, especially, CPAs.

2. A shout out here to Brighton Jones, where I first heard this phrase "richer lives"