Managed accounts prioritize tax optimization, Cerulli finds

Cerulli Associates found that just over three-quarters of firms that provide managed accounts are prioritizing tax optimization for 2025. Providers ranked tax-management improvements ahead of adding alternative assets and simplifying service delivery. Nearly 80% of respondents reported offering automated tax-loss harvesting; 43% reported automation for moving clients out of concentrated stock positions and 39% for reporting tax savings.

Scott Smith, a senior director at Cerulli, described tax optimization as “a much more reliable source of post-tax alpha” than security selection and highlighted its direct effects on client portfolios.

Cerulli reported that separately managed accounts drew more than $1 trillion in inflows last year and projected SMA assets to grow from just over $16 trillion today to more than $20 trillion by 2027. The firm linked the inflows and projected growth to rising demand for tax services.

Large wealth firms including JPMorgan, Morgan Stanley and Cetera have added tax expertise partly through acquisitions. Fintech and platform firms have expanded partnerships and programs to broaden access to tax services.

Envestnet extended access to Vanguard’s Advisor’s Alpha for advisors on its platform and launched a Fund Strategist Tax Management Advantage program in which participating money managers absorb the portion of fees that usually covers tax planning and Envestnet waives remaining charges. Erik Preus, Envestnet’s group head of investment solutions, said the program aims to remove fee barriers that can deter clients from tax-efficient moves that may incur up-front costs.

Tax-loss harvesting is the most commonly automated service because selling securities that have lost value can offset capital gains and improve after-tax returns without changing an investment strategy. Preus added that advisers need tools to deliver tax planning year-round rather than only at filing time, because year-end market rallies can erase earlier loss-harvesting opportunities.

AssetMark reported its Tax Management Services assets rose 130% over the past year to top $10 billion. The firm said the average rate of tax savings delivered through the program increased from 1.29% in 2024 to 1.42% last year. David McNatt, AssetMark’s chief wealth solutions officer, said unified managed accounts make tax planning available across multiple holdings.

Scott Bishop, partner and managing director at Presidio Wealth Partners, said tax-loss harvesting is “only one lever in a much broader, multiyear planning process” and pointed to strategies for retirement account transfers, charitable giving, concentrated equity sales, business exits and employee stock plans. Presidio employs certified public accountants and coordinates with clients’ tax and estate attorneys.

Cerulli warned that firms without advanced tax planning risk losing assets to providers that help clients maximize after-tax returns. Smith urged firms to assess their platforms and implement development plans to keep pace with advisors and clients moving assets into tax-managed SMAs.