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The Elements of a Smart-Householding Strategy

February 13, 2020 Jack Sharry By Jack Sharry

Smart-householding is the art of creating an actionable investment plan based on the aggregated view of all accounts within a household. When an advisor uses smart-householding, they can reduce costs, manage risk, and increase tax-efficiencies of all of the accounts. We have examined why householding is important at a high-level (as it relates to devising investment strategies that result in the most optimal outcomes for investors), but let’s take a look as to why it’s the most optimal method of planning for advisors.

The industry is now actively addressing the vital need of making it easy for advisors to focus on and deliver holistic, customized advice that helps investors achieve their objectives. The capabilities of the industry are connecting to create comprehensive and coordinated platforms that include the following:

  • Customer Relationship Management (CRM) Systems that allow advisors to segment their books and position the most relevant offerings to their clients and enable them to personalize and target their offerings and advice for their clients
  • Client and advisor portals to store, manage and communicate all a client’s financial information
  • Financial planning applications, which provide comprehensive financial and tax advice across investments, banking, insurance, and lending solutions and consider a client’s assets, liabilities, and potential for earnings (“human capital”)
  • Account data aggregation of all the investment holdings in a household held at various custodians
  • Holistic risk management and supervision capabilities that support clients and connect with their goals and the way they view their world, which leads to improved investor outcomes
  • Portfolio construction and investment and product proposal generation which aligns products to goals
  • Account opening and onboarding platforms to streamline enrollment and funding
  • Tax optimization across multiple products and account types to ensure tax-smart asset location
  • Ongoing household-level management and rebalancing of all holdings, products, and accounts, including advisory models, brokerage holdings, and annuities
  • Optimal income sourcing and sequencing from multiple accounts, products, and other income sources such as Social Security and pensions, as well as Roth IRA conversions
  • Trading platforms to make appropriate buys and sells to maintain the target asset allocation, risk and asset location targets, and intelligent withdrawals across multiple accounts and products

Financial advisors who manage the full household in a coordinated, optimal way benefit by providing a differentiated level of advice. They enjoy greater practice efficiency, attract more held-away assets, and increase retention across their client base. The software exists to demonstrate a quantified financial benefit for both the investor and the advisor.

Wealth managers, product manufacturers, and technology providers are working together to create platforms to help advisors plan, optimize, coordinate and quantify the financial benefit of managing household accounts in a risk-smart and tax-smart way. This comprehensive and optimal approach will dominate the investment landscape in the coming years.

Jack Sharry has been a financial industry innovator, collaborator and advocate for 40+ years. He served as an executive at Morgan Stanley, Putnam Investments, Virtus Investment Partners and now, LifeYield where he led sales, marketing, product development and distribution strategy. Jack is the Chair of the InvestmentNews Future of Financial Advice initiative and a frequent contributor to the publication, he Co-Chairs the Money Management Institute Digital Advice Community, and hosts the LifeYield podcast, WealthTech on Deck, where he talks with other industry leaders on their tech strategy designed to improve investor and advisor outcomes.