How to Use Direct Indexing with Tax Loss Harvesting

Deliver more financial value to your clients using tax-loss harvesting

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Charitable donations

Help clients get more out of charitable donations

Harvesting tax losses year-round isn’t the only way that VPI can help you lower clients’ tax bills. Incorporating our direct indexing solution into your clients’ charitable giving plans can reduce taxes now and in the future. The VPI team identifies highly appreciated securities to donate from your clients’ portfolios. You can then transfer those shares to the charity of your client’s choice.

Since charities don’t pay taxes, your clients avoid the capital gains tax they would have paid if they had sold the securities. Plus, they gain a potential deduction.  Your clients can then replenish their VPI accounts with cash to reset the cost basis for the investment, making it more likely you can harvest additional losses down the road.

Listen to Dave Murdock, managing partner of Bordeaux Wealth Advisors, explain how he used this strategy.

Dave Murdock is an advisory client of Vanguard.

 

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Direct indexing helps clients understand the value you provide

The ability to improve your clients’ after-tax alpha is just one of many benefits that VPI can help you provide. You can also customize clients’ portfolios to align with their unique personal preferences and values, apply factor tilts, and diversify concentrated positions. All that adds up to the potential for stronger client returns that are aligned to their investing focus. And it offers clear examples that you can share with clients to show them how your work helps them build wealth.

VPI is an easy win for you and your clients. So don’t miss out on the opportunity to make it a core part of your practice.

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Let us show you how Vanguard Personalized Indexing could help you find your edge by offering your clients a tax-efficient, customized investing experience.

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Learn more about Vanguard Personalized Indexing

  • Advisor testimonials highlight ways to help clients with personalized indexing

  • Advisor testimonials highlight ways to help clients with personalized indexing

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    1 Kevin Khang, Alan Cummings, Thomas Paradise, and Brennan O'Connor, 2022. Personalized indexing: A portfolio construction plan. Valley Forge, Pa.: The Vanguard Group. Simulation as of September 2021.

    2 The IRS doesn't allow an investor to sell an investment at a loss and then immediately repurchase it (known as a "wash sale") and still claim the loss. If the investor buys the same investment or any investment the IRS considers "substantially identical" within 30 days before or after the investor sells it at a loss, the loss will be disallowed. If you need guidance on whether an investment would be considered substantially identical, consult a tax advisor.

    Notes:

    • Vanguard Personalized Indexing Management, LLC (“Vanguard Personalized Indexing Management”), formerly Just Invest, LLC, an SEC-registered investment advisor, is an independently operated wholly-owned subsidiary of The Vanguard Group, Inc. (“Vanguard”). Vanguard Personalized Indexing is an asset management technology that has been developed and is offered solely by Vanguard Personalized Indexing Management.
    • For more information on Vanguard Personalized Indexing Management and Vanguard Personalized Indexing, and to access Vanguard Personalized Indexing Management’s Form CRS and Form ADV Part 2A disclosure brochure, please visit the Vanguard Personalized Indexing topic page.
    • All investing is subject to risk, including possible loss of principal. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
    • Vanguard Personalized Indexing Management cannot guarantee a profit or protect against a loss.
    • Tax-loss harvesting involves certain risks, including, among others, the risk that the new investment could have higher costs than the original investment and could introduce portfolio tracking error into your accounts. There may also be unintended tax implications.  Prospective investors should consult with their tax or legal advisor prior to engaging in any tax-loss harvesting strategy.  Neither Vanguard Personalized Indexing Management nor Vanguard provide tax or legal advice.
    • The information contained herein does not constitute tax advice and cannot be used by any person to avoid tax penalties that may be imposed under the Internal Revenue Code. Each person should consult an independent tax advisor about their individual situation before investing in any security.
    • Private investments involve a high degree of risk and, therefore, should be undertaken only by prospective investors capable of evaluating and bearing the risks such an investment represents. Investors in private equity generally must meet certain minimum financial qualifications that may make it unsuitable for specific market participants.