Minimize Use of Active Management for Brokerage Accounts

The more you trade, the more you’ll be taxed.

Realized gains in a brokerage account get taxed when they get reported, which happens whenever a trade takes place. Actively managed brokerage accounts tend to trade frequently. For high net worth investors relying too much on active management, that leads to much higher taxes than you need to be paying, and it rarely leads to better investment performance.

One of our clients came to us after generating $375,000 in realized capital gains in 2016 in her actively managed brokerage accounts from another firm. That led to sky-high taxes. The following year, we lowered her realized gains to 0, which reduced her taxes for that year by 30%.