Introductory Video - Featuring Ryan Fulmer, President

Picture this scenario: It’s April 14th, and one of your high-net-worth clients walks into your office with their portfolio statement in hand. They’re pleased with their strong returns but perplexed. "If I made good returns, why is my tax bill so high?"
This situation happens more than you might think. In the world of wealth management, hidden tax inefficiencies can quietly erode your client’s success. But with the right strategy, these inefficiencies can be significantly reduced.

The Tax-Efficiency Problem: Why Active Portfolio Management Matters

Our approach is anchored in two critical metrics:

- Realized Gains as a Percentage of Market Value: This measures how much of a portfolio’s total value is being sold and therefore subject to taxation. It’s a key indicator of the portfolio’s taxable activity and helps manage tax exposure.

 - Tax Cost Ratio (TCR): TCR reveals how much of a client’s annual investment returns are being lost to taxes. The lower the TCR, the more efficiently a portfolio is managing its tax liabilities.

A Consistent Approach to Tax-Efficient Wealth Building

At Beese Fulmer, our expertise lies in actively managing portfolios while keeping tax efficiency at the forefront. This isn’t about chasing short-term performance but rather delivering consistent, reliable, tax-sensitive strategies that benefit your clients’ long-term wealth.

 - Actively Managed Stocks and Bonds: Unlike passive strategies that blindly follow indices and generate unnecessary taxable events, our active management allows us to time trades selectively, minimizing tax impacts. By targeting realized gains within a consistent 1-3% of portfolio value, we help clients avoid excessive tax burdens while maximizing returns.

 - Reducing Tax Drag with TCR: Our goal is to keep the Tax Cost Ratio below 1%, ensuring that more of the portfolio’s returns stay in the client’s hands. In many cases, actively managed portfolios in the marketplace see TCRs as high as 2%, meaning a significant portion of the returns is lost to taxes. At Beese Fulmer, our focus on reducing turnover, coupled with strategies like tax-loss harvesting, directly addresses this issue and adds value for your clients.

Why This Matters for CPAs and Estate Attorneys

Your clients rely on you to manage their financial health, and tax efficiency is a crucial piece of that puzzle. By partnering with an advisor who consistently manages taxes, you not only avoid costly surprises but also enhance long-term wealth-building strategies.

Here’s how Beese Fulmer’s approach benefits both you and your clients:

 - Tax Predictability: Our consistent management of realized gains and TCR ensures that tax liabilities are predictable year after year, reducing the risk of April surprises and enabling more accurate tax planning.

 - Client Education: Many high-net-worth clients don’t fully appreciate how taxes impact their investment performance. By working with a tax-efficient advisor, you can help them understand the long-term value of minimizing tax drag, making them more engaged in their financial strategies.

 - Proactive Value: Discussing realized gains and TCR with clients allows you to offer more than traditional tax preparation. You become part of a strategic conversation that focuses on tax management as a key element of investment success. This collaboration positions you as a vital member of your clients’ financial team, going beyond compliance to deliver proactive value.

Actionable Steps: How to Ensure Tax-Efficient Portfolio Management

To maximize your clients’ wealth while reducing their tax exposure, consider these steps:

1. Ask the Right Questions: When reviewing client portfolios, inquire about their realized gains percentage and TCR. High turnover without a clear tax strategy can signal opportunities for improvement. If their financial advisor isn’t paying attention to these metrics, it could be costing your client more than they realize.

2. Collaborate with Financial Advisors: Partner with firms like Beese Fulmer, where tax management is built into every portfolio decision. Our proactive management of realized gains and TCR means your clients’ portfolios are working harder for them—both in performance and in tax savings.

3. Encourage Consistent Tax Management: Portfolios that are managed without tax efficiency in mind can see diminished long-term returns. At Beese Fulmer, our disciplined approach to tax-aware active management ensures that your clients aren’t leaving money on the table.

The Bottom Line: Tax Efficiency Is Not Optional—It’s Essential

Taxes can be the single largest expense for high-net-worth clients, but with the right strategy, they don’t have to be. Beese Fulmer’s expertise in actively managed portfolios, combined with our disciplined approach to managing realized gains and TCR, ensures that your clients’ wealth is protected from unnecessary tax drag. This means fewer surprises come tax time and more wealth compounding for the future.

The next time a client comes to you with their portfolio statement in hand, you’ll be ready—not just with answers, but with a strategy that optimizes their taxes and enhances their wealth-building potential. Together, we can help your clients keep more of what they earn and build a legacy of smart, tax-aware investing.

Want to Learn More?

Explore how actively managed tax-efficient portfolios can benefit your clients by checking out these resources:

  • Morningstar Direct
  • Stein, D. M., & Narasimhan, P. (1999). Tax-Efficient Investing: An Active Management Technique. Journal of Financial Planning.
  • Vanguard Research on Quantifying the Impact of Chasing Fund Performance (Kinniry et al., 2016).