Here's a simple checklist for a complicated process: The Advisor's Guide to Rebalancing
· Schedule & Document Rebalancing
o Set up rebalancing schedule.
o List rebalancing steps and parameters.
o Set up review procedures.
o Consult with compliance attorney.
· Standardize Rebalancing Process
o Limit number of models.
o Limit number of “slices.”
o Avoid exceptions.
· Simplify Rebalancing
o Create pools of liquidity for withdrawals.
o Don’t reinvest dividends.
o Choose custodian’s tax-advantaged cost basis option.
· Implement Location Optimization
o Fill up Roth IRAs with high return/high risk investments.
o Fill up Traditional IRAs with fixed income investments.
· Consider Automating the Rebalancing/Portfolio Management Process
· Evaluate Rebalancing Software
§ Avoids short-term gains
§ Identifies high cost lots
§ Avoids wash sales
§ Integrates location optimization
§ Identifies opportunities and calculates trades for tax loss harvesting
§ Offers capital gain distribution avoidance
§ Calculates tax benefits from applied tax-saving strategies
§ Produces client-friendly reports to document those benefits
o Ease of Implementation
o Ease of Use