Today we took a significant step forward in realizing our mission to make financial advice better, more accessible, and affordable with announcing plans to launch a new addition to our Model Marketplace: the Altruist Strategist suite (Strategist).
This will be the second Altruist-branded model portfolio in our Model Marketplace and the first to include direct indexing (DI), which advisors can help clients access with as little as $2,000 (more on this below.)
This first iteration of Strategist represents Altruist’s vision of enabling advisors to offer the highest level of portfolio construction to their clients. The Strategist methodology is rooted in economic theory and executed with best practices in portfolio management. Portfolios are constructed to achieve high returns without taking unnecessary risk, getting exposure to thousands of securities across sectors, countries, and regions.
But, Strategist goes beyond what most asset allocation models offer. The introduction of direct indexing into Strategist portfolios reduces overall portfolio costs, increases the level of tax efficiency, and can allow for a substantially higher degree of personalization. We believe these benefits are key factors to achieving better client outcomes.
We want to empower advisors to create great portfolios because the difference between a good and a great portfolio can mean the world to a client.
- Strategist is Altruist's flagship suite of model portfolios and the first with direct indexing, enabling advisors to deliver greater transparency and tax efficiency to clients while further lowering costs by investing directly in individual securities compared to portfolios that use funds exclusively.
- It includes two series: Strategist Tax-Aware series, optimized for taxable accounts, and Strategist series, designed with tax-advantaged accounts in mind. Each series contains 11 model portfolios at different risk levels.
- The portfolios are globally diversified and mix fixed income and equity allocations to address a broad range of risk profiles.
- Each portfolio provides exposure to over 10,000 securities across the globe, either directly or through the underlying holdings in ETFs.
Let’s dig deeper and break down each core element of Strategist—direct indexing, tax awareness, global allocation, tailored risk, and independent fund selection—and talk about how they work and what that means for you and your clients.
Now, let’s break down each core element of Strategist—direct indexing, tax awareness, global allocation, tailored risk, and independent fund selection—and talk about how they work and what that means for you and your clients.
Direct indexing for U.S. equities
Direct indexing is an investment strategy that seeks to track the performance of an index or target basket of securities, like the 500 largest U.S. stocks, by holding the individual securities directly in a client account as opposed to within a fund.
Direct indexing has been the core of many high-net-worth clients’ strategies for decades. And no wonder: direct indexing confers unique benefits that cannot be captured when investing in ETFs or mutual funds, such as avoiding fund management fees and increased tax efficiency. Elsewhere, $250,000 minimums are common for access to direct indexing. Made possible by fractional shares on the Altruist platform, advisors can help clients access Strategist with as little as $2,000—delivering more access to what we believe is the future of investment vehicles.
With Strategist’s direct indexing, clients will own U.S. large-cap equities directly in their account as opposed to through a fund. The direct indexing sleeve seeks to track the performance of the top 500 securities in the U.S. by market capitalization. This represents more than 80% of the US market. The remainder of the U.S. market is represented using ETFs.
Source: Russell data. Sample illustration, not a recommendation to buy/sell listed securities.
Tax awareness
Tax management is one of the most powerful ways to help investors increase take-home wealth. Strategist portfolios are built with tax efficiency top of mind. As a starting point, we separately constructed portfolios for taxable accounts (Strategist Tax-Aware) and tax-advantaged accounts (Strategist) to reflect the unique tax considerations of each.
Portfolios in the Strategist Tax-Aware series allocate a significant amount of the U.S. fixed-income portion to municipal bonds due to their relatively higher expected after-tax return compared to similar U.S. fixed-income securities (provided that they are not subject to the Alternative Minimum Tax [AMT]). Strategist series portfolios have no allocation to municipal bonds. Additionally, portfolios in the Strategist series overweight the U.S. market compared to Strategist Tax-Aware series portfolios due to the impact of foreign tax credits in qualified accounts.
All Strategist portfolio allocations (Strategist series and Strategist Tax-Aware series) are anchored in the global market portfolio and designed to keep turnover low, focusing on further reducing taxes’ potential drag on returns.
Global allocation
Strategist portfolios invest across the globe, with global market capitalization weights as the starting point. From there, we make specific adjustments based on risk level and tax treatment. Investing across countries and regions has well-documented benefits to portfolio performance and risk-adjusted return. With Strategist, while it can’t guarantee profit or protect from loss, investors get the diversification benefit of exposure to over 8,000 individual stocks and bonds across size, sector, country, and region.
Source: AQR
Note: International investing bears additional risks such as currency, economic, and/or political risks.
Independent fund selection
Altruist selects funds for the Strategist portfolio using an unbiased and process-driven approach. Our goal is to achieve broad exposure to asset classes in the portfolio as inexpensively and tax-efficiently as possible. The biggest input into our fund selection process is our estimate of the overall cost of ownership for a fund, or what it would cost to buy and hold the fund over the course of the year.
As one might expect, the fund expense ratio is the biggest factor in determining the overall cost of ownership. We also consider the potential impact of trading when assessing the overall costs of a fund, since friction in buying and selling can also drag on performance.
For large-cap stock exposure in the U.S., we use direct indexing to target the largest 500 companies in the U.S. Because we are not using a fund, there is no expense ratio associated with this part of the portfolio. The direct indexing component makes up more than 80% of the total U.S. equity allocation and helps to drive down the cost of the entire portfolio. In fact, with direct indexing, the blended expense ratio for the US stock allocation is less than one basis point. For a 100% equity portfolio, the overall expense ratio is 2-3 bps annually.
Overall fees to investors would include expense ratios from funds, Altruist’s Model Marketplace fee for Strategist portfolios which is one basis point per month (unless absorbed by the advisor), and advisor fees which are at the discretion of the advisor. Transaction and other brokerage fees may also apply, which can be found in our fee schedule.*
Source: Morningstar
Tailored risk
Portfolios are available across the risk spectrum to match a client’s specific financial goals and risk profile. Each series has 11 portfolios across the risk spectrum, ranging from 100% fixed income to 100% equities.
A foundation for future innovation
There’s a lot that we're excited about with the Strategist portfolio suite: tax efficiency, global diversification, independent security selection, and low cost. But we’re even more excited about what’s on the horizon.
With the inclusion of direct indexing in our Model Marketplace, there are numerous benefits that we plan to unlock, specifically more advanced management, including tax-loss harvesting, and client-level personalization through inclusion/exclusions and security screens.
Strategist is designed to use the full capabilities of the Altruist platform for maximum impact on client outcomes. We hope these offerings empower you to provide the best possible experience for your clients as we all work together to make financial advice better and more accessible.
*Important Fee Information: The Strategist series (with Direct Indexing) bears a Model Marketplace fee of 12 basis points (0.01%/month), automatically deducted in arrears from investors’ accounts each month, unless absorbed by the advisor at their discretion. Investors will also indirectly bear the fees and internal expenses of any underlying funds held in the model portfolio(s) subscribed to their account(s). Model Marketplace fees do not include other related costs and expenses such as transfer fees, administrative fees, and other fees and taxes on brokerage accounts or securities transactions assessed by Altruist LLC's affiliated broker-dealer Altruist Financial LLC, or third parties.
No Model Marketplace fees imply an investment adviser-client relationship between Altruist LLC or its affiliates and any retail client. Registered Investment Advisers (RIAs) separately provide advisory and other services for which they assess fees. The fees RIAs charge their clients are separate from the Model Marketplace fees (though an RIA may increase their own fees if absorbing the Model Marketplace fee), the fees of Altruist Financial LLC or third parties, and the underlying fees and expenses of the funds within the model portfolios. For more on fees, please see our Altruist LLC Fee Schedule on altruist.com/legal.
Investments in securities such as Exchange-Traded Funds (ETFs) involve risk, including the loss of part or all of the principal amount invested. When redeemed, shares may be worth more or less than their original cost. There can be no assurance any investment will meet its stated objectives.
Depending on the total amount invested in the portfolio, its underlying allocation and trade activity, the performance, expenses and risk profile of a direct indexed portfolio may differ from that of a comparable diversified portfolio of index funds. The tax-aware strategy is optimized for use with taxable accounts (generally, accounts with at least $2,000). Investors are encouraged to consult their tax professional for guidance. Neither Altruist LLC nor any of its affiliates provide tax advice.
