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Unlocking Investment Potential:

The Power of Tax-Managed Strategies for Enhanced Returns

Unlocking Investment Potential:

The Power of Tax-Managed Strategies for Enhanced Returns

Our Insights / Unlocking Investment Potential


Tax-managed strategies have become essential for successful investing in today’s financial landscape. Historically, taxes have significantly influenced investment decisions, a trend that has intensified in recent years due to changing regulations and economic conditions. A focus on tax efficiency is increasingly vital for various investors, from middle-income earners to affluent clients, all of whom aim to enhance their portfolio values while minimizing tax liabilities.

Recognizing the importance of tax efficiency enables investors to optimize their after-tax returns, presenting a valuable opportunity for financial advisors to incorporate these strategies into their investment planning. By addressing tax management, advisors can greatly impact their clients' overall financial outcomes, thereby strengthening relationships and establishing their role as knowledgeable partners in navigating the complexities of investment taxation.

Understanding Tax Drag:
One often-overlooked concept is tax drag, which represents a significant risk to long-term investment performance. It is estimated that tax drag can reduce portfolio returns by about 1.5% to 2% annually, potentially leading to a one-third decrease in capital over 25 years, even with strong investment returns. This highlights the importance of strategic considerations in investment management. While passive strategies like loss harvesting may provide initial tax benefits, their effectiveness can diminish over time due to increasing tracking errors and declining opportunities for loss harvesting. In contrast, actively managed tax strategies offer greater flexibility in realizing losses and optimizing after-tax returns, ensuring responsiveness to fluctuating market conditions.

Implementing tax-managed investing can help investors achieve several key objectives:

  • Enhance net returns without increasing risk exposure.
  • Mitigate capital gains liabilities associated with legacy or low-basis holdings.
  • Align investment portfolios with long-term financial goals.
  • Maximize the potential for reinvestment.

To gain insights into effectively managing tax implications and optimizing after-tax outcomes, we invite you to watch this informative video on tax-managed investing. This valuable resource provides insights into enhancing your overall investment performance through tax-managed strategies, potentially transforming your investment journey.
 



For a deeper understanding of tax-managed investing, we encourage you to explore this e-book, which offers essential insights into optimizing after-tax outcomes and improving investment performance while effectively managing tax implications. 

Embracing tax-managed strategies has the potential to transform investment journeys and promote a more proactive approach to wealth management, ultimately underscoring the significance of long-term financial planning. At Great Lakes Advisors, we are committed to empowering investors with the knowledge and tools necessary to implement effective tax-managed investing.

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Great Lakes Advisors, LLC (“Great Lakes” or “GLA”) is an investment advisor registered with the Securities and Exchange Commission under the Investment Advisors Act of 1940. Established in 1981, Great Lakes is a subsidiary of Wintrust Financial Corporation and a part of the Wintrust Wealth Management family of companies. Great Lakes is a distinct business unit with distinct investment processes and procedures relating to the management and/or trading of investment portfolios for its clients. On October 1, 2013, majority owned subsidiary Advanced Investment Partners, LLC (“AIP”) became fully-owned and integrated into Great Lakes. On April 3, 2023, Rothschild & Co Asset Management US Inc. and Rothschild & Co Risk Based Investments LLC became fully-owned and integrated into Great Lakes.

Great Lakes Advisors, LLC claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. Policies for valuing investments, calculating performance, and preparing GIPS Reports are available upon request. A list of composite descriptions is available upon request. Great Lakes Advisors, LLC’s fees are available upon request and may be found in our Form ADV Part 2A. Performance data quoted herein represents past performance. Past performance does not guarantee or indicate future results. Returns and net asset value will fluctuate. 

Manager commentary represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results, and is for illustrative purposes only. This information should not be relied upon by the reader as research or investment advice. To determine if this strategy is appropriate and suitable for you, carefully consider the investment objectives, risk factors, and expenses before investing.

The investment views expressed here are those of Great Lakes Advisors only. Opinions and estimates offered constitute our judgment and, along with other data, are subject to change without prior notice as are statements of financial market trends, which are based on current market conditions. The views expressed are for general information only and are not intended to provide specific advice or recommendations. The information contained herein has been obtained from sources believed to be reliable. GLA does not represent that it is accurate or complete, and it should not be relied on as such. Actual client portfolios may or may not hold the same securities depending on the guidelines, restrictions and other factors for the specific portfolio.

Opinions and comments may not reflect those of Great Lakes Advisors, LLC or its affiliates. Content should not be considered a recommendation or endorsement by Great Lakes for any product, service or strategy specific to any individual investor’s needs. Great Lakes is not responsible for third-party posted content. “Likes”, “Favorites”, shares, similar functionality or content appearing on third party websites should not be considered an endorsement of Great Lakes’ products or services.

Past performance is not indicative of future results.

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