Full Service Family Office Prioritizes Tax Efficiency

This article is part of a new series from etf.com highlighting financial advisors. 

Vance Barse is the founder and wealth strategist of Your Dedicated Fiduciary, which has offices in Dallas and San Diego. After a decade of consulting work that had him interacting with private wealth firms nationwide, he took some time off. While riding his motorcycle from Sturgis, South Dakota to Denver, Colorado, he conceived the idea for his firm, which would fill the gaps he had observed in the services other wealth management firms provided.

He spoke recently with ETF.com about how his firm works and how it implements ETFs.

ETF.com: Would you tell me about your firm? 

Vance Barse: We have 60 typically multigenerational families nationwide. We are a full-services wealth management firm that reviews and analyzes tax returns, estate planning documents, all insurance policies, all investment accounts, whether they're in house or outside, such as a 401(k) or defined benefit plan. 

If it involves a dollar sign within someone's estate, we help serve as a financial steward so they can make the most educated decisions in their best interest, so there are no planning gaps left behind.

We have families that have a bunch of real estate that we advise on, we have families that have very highly concentrated stock positions where everything about their profile is otherwise regular except for this massive concentration of a company stock.

Our model is pretty unusual. When families are referred to us, or if they’ve read something I've written and they reach out, I tell them upfront that the first 15 minutes are on me, and then our firm is retained.

We gather all that information from the estate at a flat cost, meaning a retainer, we will do a deep dive into the strategies for which they are eligible that have not been implemented and the things that their current financial advisor is doing that either need to stop or can be tweaked to bring significant value.

We outline different planning gaps they have that they're unaware of very specifically in our independent objective report, [and explain] how to fill those in.

We give that back to the client at a flat cost so that they can digest this information and understand what's in their best interest moving forward. If they want to, subsequent to that, they can transfer their liquid assets to us to manage discretionarily. 

ETF.com: Do you use direct indexing for your clients? 

Barse: We have on occasion, when a client is eligible for it. We present it as a strategy and then allow them the decision as to whether they want to proceed. It's up to the client. 

ETF.com: In general, how do you implement ETFs in your firm's portfolios?  

Barse: In our opinion, data should drive decisions.

The construction of a portfolio is driven by the client's tax return profile now, and what we anticipate in the future, because tax efficiency is at the core of our planning process.

When I look at a particular sector, let's say, U.S. large cap growth, I go to the actively managed mutual fund universe and vet different mutual funds. And then I look at the [passive] exchange-traded fund equivalent in that sector.

We look at historical performance, cost, tax efficiency. Generally speaking, we want to satisfy the long-term core allocation to specific sectors with a low-cost and tax-efficient allocation, unless historically there has been alpha added by using active management.

When it comes to deploying into U.S. equities, within specific sectors, we often find, historically, using a core blend of exchange-traded funds and some individual issues, contingent upon the investment objectives of the client and the tax return profile, have been better suited for that client. 

When I look at international equities, I find that, in some cases, it's been better to use active management, for example, in some emerging market areas, because historically, there has been alpha [from] active management [relative to] the passive counterpart. 

ETF.com: Are actively managed ETFs something you might consider instead of actively managed mutual funds? 

Barse: When data drives decisions and the evidentiary data supports that particular holding or that particular structure being in the best interest of the portfolio, yes, we do.

ETF.com: Do you get requests from clients to implement ESG strategies? 

Barse: We consistently receive ESG and SRI [socially responsible investing] requests from two profiles. The first profile is a client who is very socially and charitably inclined, where they want to manifest their good intentions in their investment portfolio. And the second are, generally, the children or grandchildren of clients who believe they can make the world a better place through ESG and SRI investing. It is very common. 

Contact Heather Bell at [email protected]