Fidelity Investments on Wednesday announced a new unified managed account for high-net-worth investors, the Fidelity Personalized Portfolios, which provides daily tax analysis.
“Investors are asking Fidelity for more help,” said John Sweeney, EVP, planning and advisory services. “They’re asking for help selecting investments, constructing portfolios and managing them through volatile times. Today’s challenging conditions and ever-changing tax landscape are unsettling for many investors.”
Sweeney added: “Fidelity Personalized Portfolios addresses this concern by providing a professionally managed solution for investors who have accumulated wealth, are focused on proactive management of their portfolios in the current market environment and want help managing and assessing their current holdings and potential tax consequences to try to achieve better after-tax returns.”
Bill Ebsworth, CIO of strategic advisers, said Fidelity Personalized Portfolios can help investors in three key ways: “Risk management. How hard we work to get each client to the right asset mix for their personal situation. Secondly, due diligence. We research thousands of investments to get the right one for each client. And lastly, our decades of experience managing tax-sensitive portfolios to help clients meet financial needs.”
The first step in the Fidelity Personalized Portfolios is finding out a client’s time horizon and financial and risk tolerance to create a personalized portfolio. Each day, Fidelity assesses more than 80 factors in each of these portfolios, such as an unrealized loss, or how far the portfolio has strayed from its asset allocation to see if risk needs to be reduced, or, conversely, steps should be taken to increase the potential return—without reacting to short-term market swings. Thus, the portfolio can harvest tax losses throughout the year, not just at the year-end.
Fidelity noted that investor demand for professional management and tax-efficient investing is growing. A recent survey by Fidelity found that among affluent investors who own a UMA, 48% had selected it to reduce the complexity of their portfolio or address tax obligations. Twenty-eight percent said taxes were one of their most urgent household concerns, and 39% aren’t sure where to invest to get a good return or at least not lose money.
Morningstar found that between 1935 and 2009, investors who did not actively manage their investments in a tax-sensitive manner gave up 100 to 200 basis points of their annual returns to taxes.