When markets decline, financial advisors may find themselves in what psychologist Robin Hogarth calls a “wicked” learning environment — one where feedback is delayed, patterns are unreliable, and even prudent decisions can appear flawed. Financial markets epitomize this challenge, often making advisors sound defensive in client conversations. Portfolio customization reframes this dynamic into a “kind” environment, where outcomes are clearer and tied directly to advisor-driven strategies such as tax-loss harvesting.
Tax-Focused Direct Indexing
Direct indexing enables advisors to harvest tax losses from individual securities, even if the broader index is performing well. During the April 2025 market drawdown, this approach shifted conversations from short-term losses to measurable after-tax gains.
Rather than focusing on the S&P 500’s 20% drop, savvy advisors highlighted how tax-loss harvesting turned volatility into measurable after-tax gains. For those clients, this was a powerful reminder that losses, when managed strategically, can create opportunities for growth.
These conversations shifted from reactive explanations to proactive planning. Advisors moved beyond defending performance and instead demonstrated the strategic value they bring to the relationship.
Charitable Giving and Tax Strategies
Tax-focused investing also unlocks broader planning benefits. Advisors can identify and donate highly appreciated securities from a direct indexing program, helping charitably inclined clients maximize deductions while avoiding capital gains taxes.
For example, a client wanting to establish a scholarship in their mother's name could do so by donating low-cost basis shares to their alma mater. This would not only reduce tax drag but also transform equity appreciation into a meaningful impact.
These strategies layer into a comprehensive tax plan, where advisors can also manage tax brackets or execute Roth conversions. Realizing gains in low-income years or aligning decisions with estate planning further enhances outcomes.
The Strategic Advantage
Notably, investor demand for these services is growing. According to Charles Schwab’s 2024 ETFs and Beyond Investor Study, personalization remains a priority, with three in four millennials likely to invest in direct indexing within the next 12 months. The study also found that 62% of Gen X and 56% of Baby Boomer investors are extremely interested in the topic of optimizing potential tax savings.
According to Cerulli Associates’ US Managed Accounts Report, the adoption of direct indexing by advisors remains small but is on the rise. Only 18% of advisors report using direct indexing strategies in 2024, up from 16% in 2023.
This shift transforms advisors from market commentators into strategic partners, operating in a more predictable and feedback-rich environment. With clearer connections between portfolio management and planning outcomes, advisors can speak with greater confidence and clarity.
Portfolio customization empowers advisors to demonstrate measurable value: improved after-tax returns, client-centric strategies, and proactive planning, all delivered through integrated technology.
Power Tax-Smart Investing
SS&C Black Diamond® Wealth Solutions supports this transformation by offering Managed Accounts Services, which enable advisors to subscribe to a range of tax-managed model portfolios spanning key U.S. market categories. Advisors can apply a tax overlay to either third-party model portfolios or custom portfolios built using the Rebalancer tool.
These features are integrated in Black Diamond’s Rebalancer, empowering advisors to manage all or select client accounts from a single portfolio management system. Additionally, advisors also have the flexibility to set customizable tax budgets, which guide the platform in achieving specific tax goals during rebalancing.
The result is streamlined, tax-efficient portfolio customization, delivered within the same intuitive platform advisors use every day.
Discover how the SS&C Black Diamond Wealth Solutions can help you deliver personalized, tax-smart investing at scale. Request your personal demo, call 1-800-727-0605, or email info@sscblackdiamond.com today.
