Issue link: https://resources.envestnet.com/i/1533174
Frequently Asked Questions (FAQs) FOR ONE ON ONE USE WITH A CLIENT'S FINANCIAL ADVISOR © 2023 Envestnet. All rights reserved. 2 Q5: What are some of the features and benefits of the service? • The target allocations of FSP products will contribute towards the achievement of Overlay eligibility (typically, at least 50% of the UMA Target Allocation must be allocated to SMA, and now including FSP, products in order to be eligible for Overlay Services) • The client may not have to incur the tax cost of fully liquidating all assets at account inception • The client's portfolio's holdings may be allowed to deviate on an ongoing basis from the selected UMA Target Allocation Model, potentially allowing the account to realize fewer capital gains on an ongoing basis • The client may influence the tax consequences of the account by setting a desired Tax Budget • It is important to note that a Tax Budget is not a guarantee nor a limit • The client's FSP sleeve's holdings will be monitored for adherence to Asset Class / Style drift thresholds relative to the FSP manager's model. Q6: What are some of the limitations of the service? • The client's FSP Sleeve's holdings may never match the FSP Product's model holdings • The client's FSP Sleeve's performance may deviate, and may deviate significantly, from the FSP Product's model performance • If a client desires, prefers, or requires tight adherence to their selected UMA Target Allocation Model holdings or performance, then they should not use the Tax Overlay Service • The client's portfolio may not execute the same trades as their selected products • The client's portfolio may not participate in the normal trade rotation • The client's account may realize more capital gains than the desired Tax Budget, and may continue realizing capital gains throughout the year, further exceeding the desired Tax Budget • If a client desires, prefers, or requires a guaranteed limit on realization of capital gains, then they should not use the Tax Overlay Service • The client may not apply "Do Not Sell" restrictions or alternates to securities in their account • The purpose of the tax management service is to manage the tax consequences of selling securities, therefore, it is not compatible with alternates/constraints which prohibit the trade engine from selling certain securities in the account. Q7: What are the requirements in order to use the service on an account? • The UMA Tax Overlay service is available for Taxable accounts in UMA Programs • The client must maintain full cost basis information on all holdings at the Custodian at all times • If the client does not maintain full cost basis information on all holdings at the custodian at all times, then the management of the client's account may be less accurate and may result in undesirable trade activity or undesirable tax consequences • It is recommended that the client review with their Custodian the Default Taxlot Relief Method in force for their account, for Mutual Fund securities and for non-Mutual Fund securities, and select the Default options that are most advantageous for their tax situation. The client's custodian can assist them with reviewing and changing these settings • It is recommended that the client not include FSP Products in their UMA Target Allocation Model that: engage in significant tactical or strategic shifts, engage in market timing, or make frequent and significant changes to the FSP Model Holdings. For such FSP Products, tax management will be less effective and may not be effective at all. • The Tax Overlay Service can be more effective with FSP Products with a long-term strategic focus and lower turnover • The client must carefully consider their goals and priorities for their account when deciding whether to include an FSP Product in their UMA when applying the Tax Overlay service Q8: Since this is a tax management service, do I need to change the default taxlot relief method of my account with my custodian? • For Equity and ETF securities, Envestnet will submit Versus-Specific-Purchase (VSP) instructions to the custodian for processing of partial sell transactions. • For Mutual Fund and other securities, the custodian will relieve taxlots according to the default taxlot relief method the client selects. • It is recommended that the client review with their Custodian the Default Taxlot Relief Method(s) in force for their account, and select the most advantageous option(s) for their tax situation. The custodian can assist with identifying the default taxlot relief method(s) and reviewing the options available. █████████████████ Ì200001ATCgÎ