Tax-related services are of growing interest to financial advisors, particularly as more clients are demanding such services.
This demand is likely to increase amid potential changes to
But these changes also make it more challenging for advisors to offer tax services. Tax management platform 55ip, which is owned by J.P. Morgan Asset Management, has been working with AI and other tools to automate functions that were once manual, such as
At the time 55ip started in 2015, "there was no scalability or efficiency around how to apply automated tax management in an automated way across the entire book of business and really treating all their clients fairly in a fiduciary capacity," said
55ip started partnering with asset managers such as BlackRock and Fidelity and, more recently, with Raymond James Financial to act as the overlay tax manager on the firm's platform to run across all its separately managed accounts (SMAs). The goal for the partnership, and what 55ip is working toward more broadly, is creating a customizable platform that can easily integrate across unified managed accounts (UMAs) — an effort they plan to launch by next year.
"That's a pretty compelling and industry-leading and differentiating partnership that doesn't really exist in the industry," Shah said. "We're really excited about that. We're working on the integration. We're gonna be launching that in the coming months."
This mini profile is
Name: 55ip
Website: 55-ip.com
Size of 55ip: The platform recently exceeded 100,000 accounts and $50 billion in assets under service, Shah said.
"It's been quite the run. Only four years ago those numbers were like a 10th of those numbers, if that," he said.
Products and services offered: Most of the products and services on the platform center on tax management automation that includes AI-powered tools like language modeling and advisor alerts. One of 55ip's core services is the ActiveTax Technology that automates tax transitions, withdrawals and management. The platform also has an "Intuitive Advisor Experience" that allows advisors to perform tax-smart customization to portfolios near-instantly. And then there's a combination of services called Automated Portfolio Implementation that allows for the same tax management customization for qualified and nonqualified accounts.
Who 55ip aims to serve: The platform is offered to financial advisors and RIAs.
What problems 55ip is trying to solve: The platform aims to automate the trickiest parts of tax services, such as moving a client from one model portfolio into another.
"That's where everyone gets stuck, right? Because they want to move their client from one strategy to another but they can't do it without generating a bunch of taxable liabilities," Shah said. "And so we've automated that entire process and made it very simple."
55ip has also automated the tax-loss harvesting process throughout the year as well as managing tax withdrawals when a client has bought a house or car, for example.
"We have this adage in our firm: We're looking for painkillers, not vitamins," he said. "And that's what really moves the market and the environment, the ecosystem."
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How 55ip is different from competitors: While there are different tax management software providers and platforms, Shah said 55ip is different in that it acts as an easy-to-use overlay to an advisor's existing network. Meaning, it integrates well with the platforms advisors are currently using.
"Our mantra at 55ip is to go where the client, where the advisors are," he said. "Other platforms require you to come to their platform. Our goal has always been [that] we need to go integrate where the advisors are."
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What it costs: While cost can vary based on the partnership type and size of the enterprise, Shah said it's "roughly around the industry" standard of 10 annual basis points in the form of fees that are charged on a quarterly basis.
What's next in development: Shah said a lot of 55ip's focus in the coming months is moving from having a tax management system for separately managed accounts to now having the platform as an overlay to unified managed accounts and eventually, unified managed households.
"So how we deliver that in one account, in all these different sleeves of investments, and have tax management across all of that," he said. "That's sort of the holy grail that people are working towards."
