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automated household rebalancing

Household Rebalancing and Household Asset Allocation Benefits

In an industry that is constantly affected by changes in market volatility, there are well known advantages to asset allocation and rebalancing your clients’ investment portfolios. Rebalancing at the household level instead of by individual accounts can be especially beneficial for tax-aware advisors. Traditionally this has been a highly manual process, but with the right tools you can simplify the process with automated household rebalancing and create flexible household asset allocation with Blaze Portfolio’s ATOM Align.

Benefits of Household Asset Allocation and Household Rebalancing

Most financial investors and investment advisors know the importance of asset allocation for diversification benefits and risk management. Throughout the industry, many believe that careful household asset allocation is the “secret sauce” of a successful financial investment strategy. And rebalancing is the beneficial, returns-maximizing cousin of asset allocation. There are also specific benefits of rebalancing by household vs. by individual accounts:

  • You’re Applying the Investment Strategy to Your Clients’ Overall Portfolio – Traditional account-level management, which holds the same percentages in each account whether taxable, tax-deferred, or Roth, can miss tax savings opportunities. However, rebalancing at the household level enables you to apply an asset allocation to a clients’ entire investment portfolio instead of duplicating the strategy across individual accounts. Household-level management allows for the full investment allocation to be spread among various accounts and the model to be represented in the overall portfolio.
  • You’re Reducing the Number of Trades & Limiting Trading Costs – Rebalancing by household reduces the number of trades needed to bring clients’ portfolios back to target allocations. In the scenario where each account has a model, a rebalance may generate trades in every account, while the same household rebalance could bring the allocation back in line with a single trade. Portfolio rebalancing inevitably requires trading and the associated trading costs, but with household rebalancing there is an opportunity to reduce this drag on overall performance.
  • You’re Increasing After Tax Returns with Tax Optimized Household Asset Allocation – Advisors and Financial Planners must consider the impact of the Tax Cuts and Jobs Act and how the location of investment assets will affect after-tax investment returns. An optimized asset location strategy should balance today’s lower-income tax rates against capital gains on investment assets, and should then determine what account types are best to hold each asset.  Combined with household rebalancing, clients could see more than a 20% increase in after-tax returns. Now is a good time to consider where your clients’ assets are held, how they are affected by the current economy, and how they might benefit from household rebalancing.

 

The Ease of Automated Household Rebalancing

The process of household rebalancing can be complex and very time consuming, which highlights the need for powerful rebalancing software to automate the process across hundreds of clients. Asset location and household rebalancing is a valuable service advisors can provide to their clients. As most advisors are already convinced of the benefits of automating time-consuming processes like household rebalancing, the question shifts from “Should I use an automated rebalancing tool?” to “Which rebalancing software can support my firm’s household rebalancing process?”.

Blaze Portfolio’s ATOM Align provides household-level modeling and asset allocation — including scalable rebalancing — across thousands of households, combined with customizable client rules and automated location optimization. With Blaze Portfolio, investment advisors can easily monitor household asset allocation drift and customize asset allocation strategies.

In addition to the powerful automated household rebalancing capabilities and seamless integrations with portfolio accounting systems, ATOM Align can streamline trade execution, support sophisticated trading requirements, and help clients reap all the benefits of rebalancing by household.

 

To schedule a personalized demo to see how Blaze Portfolio can help you and your clients, please visit https://blazeportfolio.com/contact/.