Tax-smart portfolio rebalancing

Introduction

After a turbulent 2022 that saw the S&P 500 drop nearly 20%, 2025 brings renewed volatility—this time with the index in the green, even as GDP contracted by 0.3% and the US dollar fell 4.6%, fueling recession fears amid shifting tariff policies.¹

But investment advisors have a rare chance to make the best of the situation with tax-smart rebalancing – a major value-add, year-round opportunity to help clients reduce or eliminate their tax consequences.

 Offering value-added services focused on estate and tax planning have become more important for advisors to remain competitive and grow their businesses. 70% of RIAs say tax planning would add the most value to their practice. And while 84% of financial advisors are focused on delivering tax optimization for their clients, it has the highest rate of reported dissatisfaction (22%). 

Portfolio rebalancing can help advisors harvest losses and limit capital gains since it combines well with tax planning, reevaluating, adjusting risk tolerances, and resetting financial goals. Asset location optimization, target overrides, capital gains budgeting, and custom thresholds on unlimited sets of tax rules are other powerful ways to meet clients’ specific tax strategies and control their annual tax burdens at the individual or household level.

91% of advisor practices currently use trading and rebalancing technology to upmarket their service strategies, scale to meet the needs of a growing client base, and gain operational efficiencies. In addition, the trading/rebalancing part of the tech stack is increasing in importance as firms grow larger. However, only 39% of advisors are very satisfied with their trading and rebalancing solution, and may not have the capabilities to meet their clients’ tax goals.

Here is why offering tax-smart rebalancing is key to your value proposition and six key ways to leverage it as part of your growth strategy.