Gerard Michael, President, Smartleaf Asset Management (SAM) joined Julie Cooling, Founder & CEO, RIA Channel, to discuss what sets Smartleaf apart from other subadvisors, and how advisors can leverage Smartleaf’s platform to deliver scalable customization and tax management to their clients.
Smartleaf Asset Management is a new type of subadvisor that serves as an outsourced rebalancing service for RIAs, broker dealers, and bank trusts. SAM differentiates itself from other subadvisors in a few key ways. First, SAM offers unprecedented customization and tax management for its clients. SAM allows advisors to manage every portfolio as if it were their own, and it enables every account to have high levels of customization and tax management, with no minimum account size.
Smartleaf Asset Management is not a proprietary separately managed account platform, rather SAM manages the entirety of the portfolio, asset allocation, and asset class rebalancing. “We’re not really philosophically about product delivery, we’re about freeing up firms to do something more important than balancing up portfolios,” says Michael.
Smartleaf Asset Management is unique in the levels of customization it offers, as well. The advisor has complete control over the product choice, whether it’s ETFs, mutual funds, equity models, or the advisor’s own model.
SAM’s use of direct indexing has garnered a lot of attention. Direct indexing is like an ETF, but an individual investor owns individual shares. According to Michael, ETFs already outperform 80-90% of all investments, and a well-managed index will outperform a comparable ETF on an after-tax expected basis.
“So, you have an investment [ETF] that’s already beating 80-90%, and you can beat it,” says Michael on Smartleaf’s direct indexing capabilities. The components needed for direct indexing are fractional shares, zero-dollar commissions, and an automated system for rebalancing, which SAM provides. The introduction of fractional shares and zero-dollar commissions have made direct indexing accessible regardless of portfolio size, whereas prior to these it used to be that direct indexing was only an option for the very, very wealthy. Direct indexing, and the ability to unwrap ETFs, diversifies a portfolio and leads to a lot more control, customization, and better tax management.
Gerard Michael is the President of Smartleaf Asset Management, a fully owned subsidiary of Smartleaf, Inc. Smartleaf has reimagined portfolio management and enabled wealth-advisory firms to deliver tax management and customization to clients at an impressive and unprecedented scale. Before founding Smartleaf, Jerry was a founder and director of Crimson & Brown Associates, which was sold to a division of the Washington Post.
To learn more, catch the replay of Smartleaf’s webcast: A Primer on Implementing Direct Indexes. Topics to be discussed:
- How will direct indexes change my practice?
- What’s driving current interest?
- What does it take to implement direct indexes?
- Is it better to outsource or insource management of direct indexes?
- Can direct indexes ever become as easy to use as an ETF?