Orion's The Weighing Machine

Jan 20 2025 40 mins 3

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Today, Rusty and Robyn are joined by This week, Rusty Vanneman and Robyn Murray talk with Brent Sullivan, Founder of Tax Alpha Insider. Brent Sullivan is a taxable investing specialist, blogger and software developer. He graduated from Cornell's Financial Engineering program, worked on PIMCO's trade floor, wrote code for Parametric Portfolio Associates, left to work at Zillow Group in the software observability team and then raised money as a venture-backed founder. Tax Alpha Insider is a blog, newsletter and media platform focused on taxable investing. Brent consults for advisers on taxable investing product marketing and development.

Key Takeaways

[01:33] - An overview of some of the things we will cover on The Weighing Machine this year.
[03:36] - Learn more about Brent’s professional background and how he ended up in his current role
[05:26] - What motivated Brent to found Tax Alpha Insider and who is it aimed at?
[06:38] - Why does Brent believe that sometimes the tax tail should actually wag the dog?
[08:03] - How can financial advisors effectively measure and communicate the value of tax alpha to their clients?
[08:56] - What is Direct Indexing, why is it important and why should advisors and investors care about it?
[10:13] - What role does technology play in the efficient execution of Direct Indexing strategies and what tools should advisors be looking for?
[11:35] - What are the most common pain points for advisors and investors using Direct Indexing and how can these be addressed?
[13:53] - When an advisor or investor is shopping for a Direct Indexing provider, what should they be looking for and what questions should they be asking?
[15:01] - Are there additional signs of good or bad Direct Indexing shops that people should be on the lookout for?
[16:05] - What are Section 351 ETFs, how do they work and what are their potential benefits?
[17:47] - Could these signal a tectonic shift for the wealth management industry?
[20:41] - How does a 351 ETF differ from an exchange fund? Do they serve the same purpose?
[22:06] - If 351 ETFs don’t solve the problem of diversifying single stock risk, what will?
[24:58] - Are there any upcoming regulatory or market trends that will affect 351 ETFs that advisors should be aware of?
[25:40] - How much should advisors and investors care about AI and how is Brent using it?
[28:23] - Are there any other key research insights that Brent would like to cover today?
[29:23] - What resources would Brent recommend for advisors looking to learn more about taxable investing?
[31:00] - What is currently Brent’s favorite investment idea?

Quotes

"Direct Indexing is an investment management strategy that favors individual stocks and bonds for portfolio customization. Customization can be broken down into at least two big categories, one of them is risk and one of them is tax…Why should investors or advisors know about this? That’s because it replaces a fund, which I consider practically a sledgehammer in portfolio allocation, with a scalpel. That’s what Direct Indexing does is give you incredible precision both with risk and tax. ” ~ Brent Sullivan

"What matters for allocators is that you’re able to rebalance a portfolio tax free. There’s a bunch of legal boxes you have to check, forget about all that stuff [for now]. Imagine that you’re in a situation where you’ve got a portfolio of direct equities and it's grown a lot, and you’re unable to rebalance or tax loss harvest just because you’re so far above cost basis. [However], you might consider rolling the portfolio into an ETF that’s accepting assets in kind. That’s what 351 allows and affords. Again, tons of boxes to check, but that’s the opportunity there…tax free rebalancing. ” ~ Brent Sullivan

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Disclosure(s) - Orion Portfolio Solutions, LLC, an Orion Company, is a registered investment advisor.

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Brent Sullivan of Tax Alpha Insider - Should the Tax Tail Wag the Dog?

Jan 20 2025 40 mins 3