By Kerri Quinn
Head of Index Solutions

Using Direct Index to help Advisors Navigate Investment Complexities
Navigating the complexities of investment portfolios requires a sophisticated approach, especially when dealing with issues like trapped capital gains, ethical investment constraints, and risk management for concentrated positions. Alphathena’s direct indexing platform offers financial advisors innovative solutions to these challenges, enhancing tax efficiency, allowing for deep customization, and mitigating risk associated with concentrated positions.

Case Study 1: Breaking Free from Trapped Capital Gains

Case Study 1 : Breaking Free From Trapped Capital Gains

Trapped capital gains pose a significant dilemma for investors, where on-paper wealth increases face substantial tax implications upon realization. Consider a client whose $10,000 investment in a stock appreciates to $50,000. The realization of this gain could result in a tax bill upwards of $20,000 due to federal and state taxes. Alphathena’s direct indexing enables strategic tax-loss harvesting, where losses from underperforming securities offset gains from successful ones, effectively reducing the overall tax liability and enhancing after-tax returns.

This scenario will be explored in our upcoming webinar, showcasing how direct indexing can manage and reduce capital gains taxes, providing practical strategies for financial advisors.

Case Study 2: Customizing Portfolios to Reflect Ethical Values

Case Study 2: Customizing Portfolios to Reflect Ethical Values

Another common challenge is aligning investment portfolios with client-specific ethical standards. For instance, a client may wish to invest in the top 100 S&P 500 securities but exclude those involved in animal testing. Traditional investment vehicles lack the flexibility for such customization. Alphathena’s platform allows advisors to tailor portfolios that reflect clients’ values while maintaining investment efficiency, enhancing client satisfaction and the advisor-client relationship.

During our upcoming webinar, we will discuss how Alphathena’s capabilities allow for the creation of personalized investment solutions that cater to specific ethical preferences.

Case Study 3: Mitigating Risks with Concentrated Positions

Case Study 3: Mitigating Risks with Concentrated Positions

Investing heavily in a limited number of stocks can significantly increase volatility and potential losses. Direct indexing offers a practical solution to this risk by allowing for a diversified and customized portfolio. Through Alphathena, investors can reduce exposure to over-represented stocks and maintain a balanced portfolio through strategic rebalancing and tax-efficient selling, thereby managing risk and aligning investments with personal financial goals.

Alphathena’s direct indexing solution equips financial advisors with the tools necessary to address a wide range of investment challenges—from managing trapped capital gains and creating ethically-aligned portfolios to mitigating risks associated with concentrated positions. Each of these case studies highlights the platform’s versatility and the profound impact it can have on portfolio management.

Check out our upcoming recorded discussion to gain insights into how Alphathena can enhance your portfolio management techniques. Watch Will Hullinger, CFP, a seasoned advisor at Verity Wealth Partners, explain the advantages of direct indexing. Discover strategies for optimizing tax efficiency, tailoring portfolios to client values, and minimizing investment risks. With Alphathena’s innovative tools, you’ll be better prepared to make informed financial decisions and help your clients achieve their long-term financial objectives more efficiently.