tax efficient investing

what you make vs what you keep

At NOW, we favour the use of Separately Managed Accounts (SMAs) for a variety of reasons, not least of which is their tax efficiency. Two main features help make a portfolio with NOW superior in every respect:

1. Tax-Deductibility of the Management Fee

Unlike mutual funds, the entire client or management fee in the SMA is tax-deductible in non-registered investments.
SMA Scenario
$100,000 non-registered account | Management Fee of 1.6% | No MER | Total client fee: 1.6% or $1,600
Tax deduction: $1,600
Mutual Fund Scenario
$100,000 non-registered account | Advisory fee of 1.35% | MER of 1.15% | Total client fee: 2.5% or $2,500
Tax deduction: $1,350

2. Tax Mitigation Strategies within the SMA

Given the close 3-way relationship between the Client, Advisor, and Portfolio Manager (PM), the PM will be aware of tax issues (gains or losses) accrued from various investment outcomes. For instance, the PM can elect to trigger gains or losses of specific securities to offset a capital gain. Otherwise known as "tax harvesting", a large capital gain (or loss) can be wiped out over the course of a tax year to mitigate the tax burden on the client.
In contrast to mutual funds, which tend to produce seemingly arbitrary and often inconvenient capital gains for investors, the gain/loss position of a portfolio inside an SMA can be managed prudently and actively. Clients are no longer at the whim of the decisions of some distant team of Portfolio Managers who oversee a fund with its own fiduciary interests and investment priorities - priorities that can conflict with the wishes of some clients.
Our clients benefit from a direct and close relationship with their very own Portfolio Manager, through our existing relationships/arrangements. 


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