G2 FinTech White Paper Examines How the Adoption of Alternative Investment Strategies by Private Wealth Managers Requires Sophisticated Tax Analysis

New York - 13 November 2012

Offers lessons from the Hedge Fund Industry

G2 FinTech, provider of tax analysis and compliance software for the investment management community, has today announced the publication of its latest white paper, Opportunity Knocks: Private Wealth Managers and Proactive Tax Services – Lessons Learned from the Hedge Fund Industry. The paper discusses how the current trend by private wealth managers to use alternative investment strategies results in complex tax implications, and as a result, requires robust tax analysis capabilities. It examines several securities tax regulations (wash sales, constructive sales, straddles and qualified dividends) and the ways in which they affect hedge funds and their investors, and extends those lessons to the private wealth management space.

Opportunity Knocks explains how high net worth clients with a higher risk tolerance who are hungry for higher returns have pushed private wealth managers to offer more alternative investments, opening themselves up to complex tax consequences typically found within hedge funds. It illustrates how this more diversified investment strategy can trigger taxable events, such as wash sales, constructive sales, straddles and qualified dividends, which are closely watched by the IRS. The paper also examines the different technology approaches – whether to buy, sell or outsource – that private wealth managers can take when augmenting their tax services. The paper discusses how this advanced tax analysis functionality can help private wealth managers differentiate themselves by offering clients proactive tax planning and management versus reactive end-of-year tax compliance services.

Brian Roberti, Managing Director of G2 FinTech, comments: “The global financial crisis has had a profound impact on both the financial services industry and the individual investor. While the industry sees an expanding list of regulations, increasingly, high net worth clients are pursuing greater returns from more diversified portfolios and tax-efficient trading strategies. As a result, tax sensitivities within the private wealth management space have increased, precipitating the need for more proactive tax analyses of securities transactions and more sophisticated technology to enable them. Hedge fund managers have faced similar issues previously – this paper clearly demonstrates the lessons that can be learned from their experience and the benefits of being an early adopter.”

Opportunity Knocks is available for free through G2 FinTech’s Tax Analysis for Securities Transactions Resource web page. A practical resource for the tax and accounting community, the page is updated regularly to address the real-world challenges that fund administrators, prime brokers and their hedge fund clients face when calculating accurate taxable gains and losses. Related white papers include: Prospective Wash Sales, Constructive Sales and Tax Implications of Straddles.

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