Customization and tax management have become central concerns for affluent investors, according to a new study by Cerulli Associates. The research, commissioned by Parametric Portfolio Associates, LLC (Parametric), examines how customization is influencing the U.S. retail wealth management sector.
The report, titled "Customized at Scale: A Framework for Next-Generation Advisory Platforms," finds that comprehensive tax-aware portfolio customization is increasingly expected by not only high-net-worth (HNW) clients but also a broader range of investors.
Among the key findings, nearly 80% of affluent investors surveyed said account customization is important to meet their specific needs. Close to 70% prioritize providers who help reduce their tax bills. Tax minimization has become the most important investment objective for HNW-focused practices, with 73% considering it “very important.” Nearly half of financial advisors now offer tax planning services; this rises to 53% among those serving clients with over $5 million in investable assets. The share of HNW client assets managed by financial advisors grew from 49% in 2013 to 66% in 2023, totaling $20.6 trillion. Additionally, 82% of managed account sponsors rank improving tax management capabilities as a top priority for platform development.
Thomas Lee, Co-President and Chief Investment Officer at Parametric, commented on changing investor expectations: “Investors today expect the same level of customization from their financial services providers as they do from everyday tools that help them shop, eat and choose their preferred entertainment. Our technology-enabled solutions go beyond traditional investment management to address a range of evolving client needs with hyper customization transforming how advisors work with clients at every life stage.”
The research indicates that tax management has shifted from being a differentiator among advisors to becoming a standard service offering.
Matt Witkos, Head of Intermediary Sales at Morgan Stanley Investment Management, highlighted the need for advisors to manage complex financial planning while focusing on taxes: “We have been leaders in tax efficient investing for nearly 65 years and through our affiliation with Parametric, we have expanded our highly customizable set of solutions to better address specific portfolio needs that vary as life circumstances change,” he said. “The ability to adapt investment strategies as investors’ lives change while also looking at the tax implications for possible efficiencies creates value and strengthens the advisor-client relationship.”
The report explores processes and products supporting customized outcomes such as direct indexing, custom bond separately managed accounts (SMAs), tax-managed equity long/short strategies and options overlays. It offers guidance for wealth managers and financial advisors on developing leading capabilities while avoiding common pitfalls during platform development and adoption.
Holistic financial planning and oversight at the household level are also identified as emerging priorities within advisory relationships.
Mr. Lee added: “The value proposition has shifted from simply managing investments to holistic financial planning using investments to achieve specific goals—especially through tax management and customization,” he said. “Not only do we help advisors identify the right balance of potential losses to offset gains for tax purposes, but we also identify potential savings and present thoughtful options that reposition portfolios to look beyond tax management to address the core client need.”
The study details how firms are innovating around scalable customization—particularly regarding taxes—and considers strategic decisions about building or partnering for these capabilities.
Based on interviews with industry executives and data analysis from Cerulli’s databases, the report highlights significant changes underway in wealth management driven by growing demand among both investors and advisors for personalized solutions focused on effective tax management.
Parametric operates as part of Morgan Stanley Investment Management—the asset management division of Morgan Stanley—delivering custom portfolio solutions designed around evolving investor needs.