Portfolio Management Details

Treatment of Cash

Treatment of Dividends

Tax-Loss Harvesting

Tax-Sensitive Portfolios

Treatment of Cash

By default, our models have a 1% cash buffer. On a daily basis, we are alerted to, and act upon, cash (or security) contributions to a managed account. Assuming a client does not have recurring distributions set up and there is not a cash restriction on the account, if cash exceeds 2%, we will bring that amount back down to 1% by investing the excess cash into the model portfolio assigned to the account.

We also run a monthly review process that catches cash greater than 2% that developed for a reason other than a contribution. Those reasons could include:

  • If or when non-model positions in the account pay out income/dividends
  • In a sub-advisory relationship: 1) if the advisor did not set the account to reinvest income/dividends, and/or 2) if trades occurred that we did not initiate, and the advisor forgot to alert us

When an account is sleeved into a managed and non-model portion, we do not monitor or act on the non-model portion and would only invest cash from that sleeve when directed by the advisor to transfer it over to the managed account.

Treatment of Dividends

Our standard flat fee schedule applies to households up to $3M. There are additional costs and risks associated with larger households, and First Ascent applies a fee adjustment in those cases. Contact First Ascent to discuss pricing prior to submitting an application for a household over $3M.

Tax-Loss Harvesting

Tax loss harvesting is the process by which we intentionally sell portfolio positions at a loss in order to generate potential tax losses for investors in our tax-sensitive portfolios. We may, but are not required to, engage in tax-loss harvesting transactions at any time throughout a calendar year.

In most cases, when a position is sold in order to harvest a loss, it is replaced by another position to maintain the portfolio’s proper asset class exposure. The replacement position may remain as a portfolio holding indefinitely, or, after 30 days, may be replaced by the position that was originally sold to harvest the loss.

We conduct tax loss harvesting activities on an account-by-account basis. We do not coordinate tax loss harvesting activities with, or even consider, the purchase or sale of securities held in other accounts.

We do not provide tax advice, nor represent or guarantee that the objectives of our tax loss harvesting program will be met. Clients are advised to consult a qualified tax professional to determine their ability to claim losses based on their individual situations.

Tax-Sensitive Portfolios

All First Ascent portfolios are available in tax-sensitive versions. The goal of our tax-sensitive portfolios is to reduce the amount of current taxes paid by clients, thus helping to preserve their wealth.

Our general approach to portfolio management helps keep realization of taxes low in two ways. First, our portfolios are predominantly invested in lower turnover, broadly diversified funds that tend to be fairly tax efficient. Second, our portfolios have relatively low turnover, which also keeps realization of taxes low.

In order to further increase their tax efficiency, we perform the following additional services for each account that is invested in one of our tax-sensitive portfolios.

Employ Tax Efficient Trading Practices

For accounts at our primary custodian where we have control over account set-up, we elect to prioritize trades in the following order, which is designed to strategically sell lots with unrealized losses in the most tax efficient manner.

  • Short-term loss—descending order by cost per share (highest to lowest), and as a result, taking the biggest short-term losses first
  • Long-term loss—descending order by cost per share
  • Long-term gain—descending order by cost per share (highest to lowest), and as a result, taking the smallest long-term gain first
  • Short-term gain—descending order by cost per share

Please note that this method does not factor in the possibility that a lot sold via this method will itself cause a wash sale, and therefore disallow the loss on the trade itself.

Harvest Tax Losses

Periodically, based on changes in market conditions, our investment team monitors our portfolios for potential tax loss harvesting opportunities. If we identify opportunities to harvest losses, we may implement trades to capitalize on them if we believe the potential benefits outweigh the costs.

Use Tax-Exempt Fixed Income

We utilize tax-exempt bonds in place of traditional fixed income.

Select Tax Efficient Investments

We review each investment in our portfolios for tax efficiency and generally avoid investing in mutual funds or ETFs if we deem them to have excessive turnover or capital gains distributions, or if we believe they are otherwise inefficient for a taxable account.

Monitor Capital Gains Distributions

Our investment team monitors expected year-end capital gains distributions from each fund in our tax- sensitive portfolios. If a security is expected to distribute a significant capital gain, we may trade out of that position to avoid a taxable event.

Options for Advisor’s Fees

First Ascent can accommodate many different fee calculation methodologies for advisors. These include:

  • Asset based fees (%)
  • Flat dollar ($) fees
  • Tiered fee schedules
  • Linear fee schedules

Fees can also be billed prorated across all accounts in a client household or taken from any single account(s).

Advisors can also include a separate financial planning fee.

Collected advisor fees are sent to the advisor’s bank via ACH with a target date by the 15th of month following quarter-end.

Fee Reporting

  • All fees and calculation methodology appear on each client’s quarterly performance report. Reports are posted to client portals each quarter, as well as posted in Orion’s Reporting application for advisor access.
  • All fees and calculation methodology are also posted in an aggregated report for each advisor showing all fees billed on all accounts each quarter. These are posted in Orion’s Secure Exchange application each quarter for advisor access. This report is posted prior to debiting client accounts and advisors are notified by email to review.
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