A Simple Checklist For A Complicated Process

Tuesday, April 09, 2013 02:34
A Simple Checklist For A Complicated Process

Tags: advisor technology | rebalancing

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

o        Functionality

§     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

o        Support

o        Price