Issue link: https://resources.envestnet.com/i/1533179
For more information, go to investpmc.com. Envestnet | PMC FOR ONE-ON-ONE USE WITH A CLIENT'S FINANCIAL ADVISOR ONLY. 3 Portfolio In Transition Illustration** "High Net Worth" Client Value: $1,164,913 Cost Basis: $894,870 Tax adverse client is transitioning assets to new financial advisor and switching financial institutions. The Overlay Services team proposed the new diversified investment solution for the transition. No Tax Management Net Realized Short Term Gains Net Realized Long Term Gains First Year Tax Bill $37,623 $162,577 $54,043 Tracking Error vs. Realized Capital Gains 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% $0 $100,000 $200,000 Selecting A Tax Budget The client was provided an analysis done by an Overlay Specialist that shows the tracking error based on the different levels of capital gains realization. The potential deviation of the portfolio's performance from the investment manager's portfolio will be greater, with a smaller amount of capital gains being realized. The client can then consider what level of deviation they are comfortable with as well as the exact amount of long-term gains they want to realize. **This is a hypothetical example for illustrative purposes only and not based on actual account information. Assuming an income tax rate of 40.8% and a capital gains rate of 23.8%. Potential Outcome The client chose a tax budget that realizes $50,000 in long-term gains in year 1 to be able to have a reasonable first year tax bill of $11,900 while maintaining a tracking error below 2%. With Tax Overlay, their tax bill ended up being $43,121 less than if they did not use the Overlay, and with a tax management fee of $1,164, they ended up saving $41,957 in total the first year. Year One Tax Budget Net Realized Short-Term Gains Net Realized Long-Term Gains Weighted Account Tracking Error First Year Tax Bill Due To Transition Tax Management Fee Potential First Year Tax Savings No Tax Management $37,623 $162,577 .02% $54,043 $0 N/A $0ST/$0 LT $0 $0 2.81% $0 $1,164 $52,879 $0ST/$50K LT $0 $50,000 1.80% $11,900 $1,164 $40,979 $0ST/$100K LT $0 $100,000 1.22% $23,800 $1,164 $29,079 $0ST/Unlimited LT $0 $162,577 .80% $38,693 $1,164 $14,186 █████████████████ Ì2000015IHOÎ