Stop Maximizing Returns. Start Maximizing After-Tax Wealth
Ryan Nauman interviews Shang Chou, co-founder and managing partner at Dishmi Capital, about how portfolio construction is evolving beyond traditional 60/40 and mean-variance optimization toward maximizing after-tax wealth. Shang shares his Wall Street background (PIMCO, J.P. Morgan, Goldman Sachs), work at Simplify Asset Management, and the personal liquidity-event experience that motivated Dishmi’s focus on helping taxable investors with concentrated stock and major life events. He argues advisors leave “structural alpha” untapped by optimizing for pre-tax returns and outlines a three-dimensional framework—time, the full balance sheet (including proactive, tax-aware borrowing), and an expanded solution set—highlighting tools like tax-aware long-short, exchange funds, variable prepaid forwards, collars, SPX box spreads, and Section 351 exchanges. He predicts tax-aware portfolio construction will become table stakes and expects continued growth in the independent advisory channel.
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00:00 Why Tax Alpha Matters
01:10 Meet Shang Chou
02:44 Founding Dishmi Capital
05:17 Planning Before Liquidity
06:28 PIMCO Structural Alpha
08:55 After Tax Mindset Shift
12:27 Three Dimensional Framework
15:33 Borrowing Smarter for Homes
17:41 Institutional Tools for Advisors
20:32 Biggest Untapped Tax Wins
23:13 Which Strategies Go Mainstream
25:56 Life Events Drive Planning
28:28 Future of Tax Aware Advice
31:38 Where to Find Sheng
32:12 Closing and Subscribe
Transcript
Shang Approval first video1827908984:
Hello, everyone portfolio construction has
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:evolved over the years as more pressure
has been put on the 60/40 portfolio, and
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:innovation has brought more sophisticated
investment strategies to retail
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:investors, while a bigger emphasis has
been placed on limiting tax obligations.
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:Well, I have on an industry expert
who's gonna share his thoughts a- and
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:a very interesting take on portfolio
construction and generating tax alpha.
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:All right.
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:Let's go ahead and get started.
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:I have already talked enough, and let's go
ahead and bring on the star of the show.
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:I'd like to give a very
warm welcome to Sheng Cao.
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:Sheng is a co-founder and managing
partner at Dishmi Capital.
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:Sheng, thank you so much
for coming on the show.
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:It's an honor to have you.
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:I'm really excited
about this conversation.
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:As you know, limiting taxes, generating
tax alpha is very important today.
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:So, um, can you go ahead and
please tell us a little bit more
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:about yourself and Dishmi Capital?
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:Absolutely.
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:And first of all, Ryan, thank
you so much for having me.
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:I'm really excited for our conversation.
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:Uh, just a quick background on myself.
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:Um, you know, I've worked on Wall
Street for 20-plus years, with the
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:bulk of my time spent actually on the
institutional asset management side.
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:I would say my formative years
were with PIMCO in the early:
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:uh, on the fixed income side.
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:I've also spent time at J.P.
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:Morgan and Goldman Sachs.
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:Uh, always had a bit of an entrepreneurial
bent myself, and so, uh, during COVID,
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:when we were all working from home,
I joined a group of PIMCO colleagues
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:and helped build an asset management
firm called Simplify Asset Management.
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:We were the some of the first in the
ETF industry to put over-the-counter and
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:listed derivatives into the ETF wrapper.
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:Also worked on things like
Section 351 exchanges, which
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:we can get into more later.
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:Uh, but what I was seeing was that
there was this democratization of some
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:really complex, sophisticated products
that can really help move the needle.
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:So about a year ago, I launched
my firm, Dishmi Capital.
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:Uh, quite simply, we're an
SEC-registered investment advisory firm.
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:Uh, and what we specialize and do for
folks is we try to think, uh, very
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:thoughtfully about things like tax alpha,
alternative investing, uh, because we
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:see there's so many really great tools
and solutions out there that can really
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:move the needle for taxable investors.
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:Yeah, that's fantastic, Sheng.
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:I love your experience.
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:You started at PIMCO.
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:I know the team over
at Simplify very well.
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:Great team.
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:You've started a great thing there.
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:Love it.
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:So let's, um, focus on Dishme.
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:Why did you start Dishme Capital?
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:What was it?
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:You just thought- Yeah … "You know what?
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:Let's, let's go on my own here
and- Yeah … do my own thing."
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:Or, or what was the
thinking behind starting it?
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:Yeah.
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:You know, and it comes down to a
very, like, personal and visceral
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:experience I had with my own family.
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:Um, when I was, you know, getting my MBA
ree at UCLA in the, you know,:
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:2014, my fiance, who's now my wife,
um, was in biotech, and she had joined
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:this fledgling startup in Santa Monica,
which ended up going public and then
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:getting acquired by Gilead for, like,
billi- billions and billions of dollars.
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:And I'll never forget the morning we
woke up where we were these two young
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:kids with, you know, tons of grad
school debt, you know, didn't have two
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:nickels to rub together, and overnight
we became, I guess, what you would
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:call a high net worth individual.
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:Uh, along that path, you know, I
always say I- we made so many mistakes
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:because we really didn't know what
we were doing, and we didn't go and
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:seek the advice of, you know, someone
who could help us navigate this.
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:Um, at the time, you know, we
were just thrilled and delighted.
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:You know, we were…
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:I remember it was almost euphoric when we
got the news that the company was bought.
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:But what we didn't realize was we had
actually just signed on to get on for the
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:rollercoaster ride of our lives, right?
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:Because when you have a big portion
of your net worth in a single stock,
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:you get on the ups and the downs, and
you can see some really big swings.
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:And so that experience really taught
me a lot, and I spent the next 10-plus
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:years of my life really building
some products that can help, you
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:know, things like exchange funds.
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:I also use tools like
variable prepaid forwards.
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:Uh, in recent years, we've seen the
rise of things like tax wear long-short.
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:So this whole solution set, you
know, has been brought to market by
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:all these asset management firms.
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:And now as advisors on the independent
side, right, we have this really cool
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:opportunity to work with this whole
solution set and really help tax law
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:advisors navigate these types of events.
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:Sheng, I love that.
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:I love that you, you know, started
based on your, you know, personal
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:experiences, your- and your wife's.
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:That's fantastic.
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:And I feel as if what you went through
then, you and your wife, and, you know,
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:have all this exposure in one stock.
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:You know, you, you had a
liquidity event worked out well.
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:I feel like more and more people are
experiencing that now with these AI
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:startups and these tech startups.
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:Now all of a sudden they sell, they
merge, they have this liquidity
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:event, and now all of a sudden they're
in flux with all this money that
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:maybe they didn't have yesterday.
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:So I have a feeling your experience works
very well with what's going on today.
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:A- absolutely.
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:And, you know, the, the one lesson that I
really picked up was it's never too early
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:to start planning and thinking ahead.
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:Um, for us, you know, in like 2015,
:
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:young kids living in an apartment.
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:Um, you know, we had aspirations
and we had goals, right?
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:This was what our life was about, and
we wanted to get married, we wanted
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:to buy a home and start a family.
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:And in hindsight, had we planned
more proactively, we co- could have
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:probably achieved a lot of those
goals and objectives in a way that
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:was potentially more tax efficient.
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:You know, uh, we wouldn't have gotten
surprised with the massive tax bill
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:when we went to see our CPA at,
you know, the start of the year.
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:Um, and so, you know, that extra ounce
of planning, it doesn't take a lot of
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:effort or time, but it can go a really
long way in helping, you know, change
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:the outcomes of these situations.
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:Yeah.
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:That's fantastic.
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:And you brought up, you know, taxes.
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:I'm sure, you know, when you get
that liquidity event, let's say you
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:sell a business or, you know, you
capitalize on a, you know, being part
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:of a business that was sold- Tax is
our big impact on, on that liquidity
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:event and, and bringing money.
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:And you mentioned during your time at
PIMCO, you've compared, um, today's
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:taxable wealth management industry and
the fixed income industry before Bill
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:Gross really transformed it at PIMCO.
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:You state that advisors are leaving
structural alpha on the table.
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:What similarities do you see, and why is
now the right time to rethink portfolio
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:construction for that taxable investor?
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:Yeah.
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:Yeah, absolutely, Ryan.
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:And, you know, just to share with, you
know, your viewers, you know, it's-- I,
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:I drew the comparison to, you know, PIMCO
in the '70s where at the time bonds were a
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:very sleepy part of, you know, the market.
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:People would just buy and clip
coupons and hold them to maturity.
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:Then along came, uh, you know, these,
the scrappy group of folks who said,
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:"Hey, why don't we actively manage this?
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:We can trade them.
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:We can try to buy them for a
certain price, sell them for more.
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:We can roll down the yield curve."
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:And then as the derivatives market
started evolving, they started
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:using things like options and very,
very early on things like swaps.
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:And this was able to create sort
of the structural advantage in how
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:they built and created portfolios.
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:Uh, you know, I worked there from
the start of:
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:2014, so just under four years.
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:But when I was there, I remember,
you know, we had an equity suite,
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:you know, at the time, uh, at PIMCO.
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:And what they were doing was effectively
using derivatives to replicate some
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:sort of beta or broad S&P 500 exposure.
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:But when you use derivatives, they
can be very capital efficient.
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:And so let's say for every $10 of
exposure in the S&P 500, you might
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:only need to outlay two or $3, and that
remaining seven or $8 can be actively
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:managed and to buy things like, you know,
investment grade corporate bonds or, you
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:know, agency debt or something that can
outperform sort of the cost of financing.
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:And you end up with a exposure that
looks and feels very much like the
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:S&P 500, but is structurally set up
to outperform it just by a little bit.
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:And so that concept always stuck with
me, and we see a lot of parallels to
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:that today in sort of the tax-ware
investing world for individuals.
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:Yeah, it's interesting because now
within just ETF wrappers, all the
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:derivatives that are now being used
in the ETF wrapper, they've become
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:very popular, whether it's using
to generate, uh, or enhance income
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:or eliminating drawdown, uh, risk.
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:So it's interesting that, you know, PIMCO
was doing it, you know, 10 years ago.
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:That's fantastic.
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:Absolutely, yeah.
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:So you suggest that many advisors
still optimize portfol- portfolios
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:primarily for, uh, pre-tax returns
using traditional risk allocation or
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:asset allocation models, whether it's
60/40 or just a, you know, efficient
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:frontier mean-variance optimization.
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:How should financial advisors
begin shifting their mindset toward
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:maximizing after-tax wealth instead of
simply maximizing investment returns
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:via a 60/40 portfolio framework?
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:Yeah.
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:Yeah, absolutely, Ryan.
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:And I think first and foremost, you
know, I would say, you know, I think
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:you and I and most of your viewers,
in fact, all of your viewers, you
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:know, we all eat after-tax returns.
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:Like, the things we pay our mortgages
with, you know, our kids' tuition,
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:like our food on the table, those
are after-tax dollars that we spend.
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:So it's very important to think
through both the pre-tax as
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:well as the after-tax lens.
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:And, you know, historically in the
industry, at least from everything I've
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:seen, the general portfolio construction
process might look something like this.
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:You know, you'll sit down with
your advisor, have a conversation
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:about your goals, your
objectives, your risk tolerance.
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:Some of that data might get plugged
into some financial planning software.
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:Uh, they'll share a Monte Carlo
simulation to make it look really fancy.
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:Maybe they'll share a probability
number of you achieving your goals.
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:And they also take your starting portfolio
today, and usually they show you a
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:new portfolio which will increase the
chance of you hitting your goals, right?
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:And so when you think about that, it's
a very static process that sort of just
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:assumes, like, this moment in time, this
portfolio I'm gonna show you is gonna
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:be the right thing for us to do for the
next, you know, three to five years.
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:Plus, we may maybe make some
tactical adjustments along the way.
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:And currently, all of the inputs that
got baked into this whole process,
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:right, the capital market assumptions,
those mean-variance optimization things
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:we did, uh, those are all based on,
you know, like pre-tax returns and,
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:you know, correlations that were sort
of based on historical precedents.
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:So there's a lot of
assumptions baked into this.
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:And what I'm saying is that I think,
you know, that's a good process.
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:It's works reasonably
well for most people.
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:But when you think reasonably well,
it also leaves a lot on the table.
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:And so maybe a different way to think
about it is to think rather than go
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:through this static process, we should
think dynamically over a period of
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:time because our tax realization, our
tax profiles are gonna evolve, right?
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:We should think through
holistically both the asset side
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:as well as the liability side.
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:You know, like, much like a pension plan
might do liability-driven investing, let's
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:think about both sides of that, right?
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:And then let's bring some of these
new solutions that we've kind
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:of, you know, have come to market
and are accessible to most of us.
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:Maybe there's ways we can help, you know,
augment some of those return profiles.
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:So there's a lot of different ways
to slice and dice this, but I'm
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:saying I think we can maybe evolve
from beyond that traditional planning
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:process into something different.
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:Yeah, Sheng, I think that's fantastic.
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:You know, at Zephyr and,
you know, we focus…
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:I've done a lot of research.
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:I'm a big advocate of mean-variance
optimization, the efficient front,
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:and just, um, modern portfolio theory.
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:However, things have changed, just
like the nine-style equity box.
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:Maybe it's time to move past that.
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:Um, things are evolving.
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:You know, that worked really
good when it was just basic US
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:equities, foreign equities, fixed
income, and create a portfolio.
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:But now things have changed,
so now I think it's a very good
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:point that maybe you broaden the
horizon in terms of building that
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:portfolio, portfolio construction.
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:And you've come up, you've mentioned
it just briefly there, come up with
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:a three-dimensional framework, which
includes time, the balance sheet,
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:and an investment solution set.
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:Can you maybe talk more and walk through
each, uh, each dimension, explain
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:why considering all three together
can create better client outcomes?
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:Yeah, absolutely.
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:Um, you know, I would say
first, for time, you know, the
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:reality is we are individuals
that have finite time horizons.
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:A lot of the previous portfolio
construction processes maybe were
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:borrowed from the institutional
world, like the endowment model.
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:You know, endowments have
infinite horizons, right?
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:They don't fear emo- they
don't feel emotions the way
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:we do, like fear and greed.
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:Uh, and so we should maybe tailor the
way we invest, you know, from there.
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:Uh, and concurrently, right, if you can
imagine if you're an individual navigating
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:an upcoming sale of a business, you might
have a concentrated single stock position,
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:or just maybe a very complex, varying,
you know, tax, um, picture, you know,
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:over the next few years of your life.
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:You wanna be thoughtful around that.
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:You wanna plan for that, right?
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:Something you do this year might look
a little bit different the next year.
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:And importantly, by doing those
different things, you can really move
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:the needle and add significant value.
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:Um, along the lines of the asset and
liability side, you know, it, it just
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:seems so obvious where, like, you know, we
are individuals, much like corporations,
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:that have assets and, and liabilities
on both sides of the balance sheet.
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:But the reality is the industry
is so silent on the, on
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:only the asset side, right?
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:And even within the asset side, you
carve out these sub-asset classes and,
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:you know, no one's really thinking
about how should we borrow efficiently.
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:Everyone's sort of borrowing
just in time, right?
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:If I wanna buy a house, oh,
shoot, I should call the bank
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:and try to figure out a mortgage.
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:You know, if I'm gonna buy some, buy a
car, you know, I should get a car loan.
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:But no one's really thinking, "Well,
let's proactively, structurally set up
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:our balance sheet so that we have the
flexibility to borrow at the lowest
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:cost possible, and have that flexibility
on hand for whenever we need it."
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:So that's the way that
we think about borrowing.
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:Uh, and then lastly, the solution set.
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:You know, like, it's been really
incredible the last few years.
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:You know, as I mentioned, things like
tax-aware long-short, tax-aware trader
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:hedge funds, the variable prepaid
forwards, flex color options, SPX box
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:spreads, you know, exchange funds.
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:These are now accessible to individual
investors through advisors, you know.
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:And so they've become so much more
accessible from even just five years ago.
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:So the toolkit has really,
really greatly expanded.
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:Mm-hmm.
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:I agree.
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:That, uh, the solution set, like
you said, is expand- Every day
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:we're getting new exotic ETFs, which
depending on where you sit, might
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:be a little bit too exotic for some.
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:But again, it helps, you know,
potentially build better investment,
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:uh, portfolios for clients to help
them achieve their goals- Yeah … if
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:they're used the right way.
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:I love your take on the balance
sheet and just borrowing.
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:Like you said, n- I'd say 99% of us,
we just say, "All right, buy a car.
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:We gotta go to the big banks and, and
get a car loan or a mortgage," and
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:there's not very many other options.
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:So I'm glad you brought that up.
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:And is, is there a place where clients
can maybe, or- You know, borrowers can
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:get more information- Yeah … about
doing different things there?
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:Yeah.
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:You know, and, and I had this
conversation actually very
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:recently, um, with an individual
who's looking to buy a new home.
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:And I think traditionally the
order of operations might be to
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:borrow first, then buy, right?
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:You go to your bank, apply for a
mortgage, go through underwriting, and
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:then you can go acquire the house with
a down payment and with the mortgage.
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:What that ends up happening is, if
you do it that way, you are capped at
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:up to 750,000 of, of, uh, deductible
interest on that mortgage debt.
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:And so, you know, you can actually
change the order of operations by
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:buying first and then borrowing.
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:And if you do it that way,
you end up actually…
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:you can actually override
that $750,000 cap.
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:And one of the potential paths we
discussed was, well, if you happen
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:to have a brokerage account with a
portfolio on there, let's take a look
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:at that, and maybe there's ways we
can de-risk that, you know, portfolio.
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:If it's, say, in equities or single
stock, maybe we can collar the
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:position so that it's, we know worst
case this is gonna be the floor.
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:But once the floor is established, we
can do something like trade an SPX box
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:spread, which can allow you to borrow at
pretty much near or at risk-free rates.
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:And it's also a very tax efficient
way to borrow because you can
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:deduct the cost of borrowing.
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:And then you take that, those
proceeds and you buy the house.
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:Once you've bought the house,
you can do a cash out refinance
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:through your bank, right?
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:And then those proceeds are, are
deductible and limited against, uh,
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:you know, things like investment,
uh, interest from investing.
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:And so there's just, you know,
creative ways to think about the
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:order of operations and, you know,
in conjunction with your bank, with
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:your advisor, your tax advisor.
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:Uh, you know, I think there's just
ways to unlock some value for clients
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:that are looking to, to undergo these
major transactions in their life.
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:Yeah.
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:That's fantastic.
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:And like you said, Shane, e-
for a lot of people they're, you
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:know, they don't think of that way
of, you know, tax alpha, right?
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:So lot of good options out there.
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:You know, reach out to somebody like
yourself who can, you know, help financial
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:advisors with those different ideas.
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:And you've talked about institutional
investors, you know, investing like an
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:institution in a hedge fund approach.
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:Their approach to portfolio construction
is different than most wealth managers.
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:What are the biggest lessons advisors
can borrow from institutional
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:portfolio management without making
portfolios overly complicated?
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:Yeah.
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:And I think that's one of the
exciting things you, you touched
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:on earlier too, Ryan, which is this
proliferation of, you know, ETFs.
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:And, you know, I think at
this point there's more ETFs
338
:than there are single stocks.
339
:Uh, but along the way, you know, there's
been some really interesting products that
340
:have democratized what's been traditional
and institutional investment strategies.
341
:Portable alpha, return stacking, you know,
derivatives, hedging, liquid alternatives.
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:And now, you know, advisors and
individual investors can potentially
343
:use these tools to really create better,
more robust and optimal portfolios.
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:Um, I'll give you one really simple
low-hanging fruit example, which
345
:is, you know, historically, we've
sort of depended on stocks and bonds
346
:to be diversifying to each other.
347
:You know, bonds are supposed to dampen
the volatility, but you might have
348
:a time like in 2022 when the Fed
commenced, you know, the rate hiking
349
:cycle, and bonds sold off that year,
equity sold off as well, where that sixty
350
:forty, you know, suddenly broke down.
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:You know, something like managed
futures or trend following, you know,
352
:historically these exposures have
provided really great amounts of things,
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:what we call crisis alpha, right?
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:These are low to kind of, you know,
low teens to high single digits,
355
:absolute returns that are uncorrelated
with both stocks and bonds.
356
:So you can imagine in a scenario like
twenty twenty two, obviously, with
357
:the caveat that past performance is
not indicative of future performance.
358
:But, you know, it's delivered
sort of a diversification effect,
359
:and that's made for better, more
robust portfolios for investors.
360
:So tools like that are now at
pretty much everyone's fingertips,
361
:and it's an exciting time.
362
:Yeah, and at the f- at the, you
know, kind of outside looking
363
:in, they sound complicated.
364
:They might sound like, "You know what?
365
:How am I gonna explain this to a client?"
366
:But there's a lot of education out
there now, whether it's on a podcast or
367
:blogs about this, and, and help, like
Dishme, that, you know, can help advisors
368
:understand these strategies where…
369
:And if they're in a ETF wrapper,
they're much easier to implement
370
:than, say, doing a collared
spread or all these o- different-
371
:Yeah … option strategies on your own.
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:So I love that there's all this
democratization in investing.
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:But again, financial advisors,
I say this a lot, make sure you
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:know what you're getting into.
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:Do the research on these strategies
so you can, um, help your
376
:clients and position them better.
377
:Absolutely.
378
:You know, many advisors, they focus
on generating investment alpha.
379
:You know, we here at, you know, Zephyr,
we talk a lot about generating alpha.
380
:It's very important.
381
:But you make the compelling case
that tax alpha can compound into
382
:significant lifetime wealth.
383
:In your experience, where are advisors
leaving the greatest tax opportunities
384
:untapped, and what changes could have
the biggest impact for affluent clients?
385
:Yeah, absolutely.
386
:And, you know, uh, just in terms
of alpha, you know, it's incredibly
387
:ephemeral, difficult to capture, you
know, and there are some very, very
388
:smart people, people much smarter
than me, who are trying to seek that
389
:out in the form of, you know, hedge
funds, venture capital, private equity.
390
:Where I think as an advisor I can
truly add value is by doing very
391
:rigorous, thoughtful diligence
on these said manner, right?
392
:In terms of investment alpha, pre-tax
alpha, um, I, I don't think I'm the
393
:right person to go pick stocks and
think that they're gonna outperform
394
:the S&P or something like that.
395
:But we, we know a number of managers
that are very thoughtful and
396
:have a track record of doing so.
397
:So that's on the investment alpha side.
398
:I think my role is more
diligence, research, right?
399
:Staying up to trends, uh, of what's
going on in the industry and getting
400
:access, importantly, for our clients.
401
:I think as advisors, though, the
tax office side is something that
402
:we can really add a ton of value on.
403
:A lot of that lies, frankly,
in just the structuring of both
404
:the asset side and the liability
side of a client's balance sheet.
405
:You know, when I think of a client's,
you know, assets that they hold,
406
:there's sort of two roles, right?
407
:There's the investment role
it has to fulfill, right?
408
:Think maybe you have some core
US equities, you know, that's
409
:your growth bucket, that's
gonna keep up with inflation.
410
:Uh, you know, long term, you know,
over 10, 20 years, it should, you know,
411
:grow into something very meaningful.
412
:But there's also a tax side of it, right?
413
:And so is there a way that maybe we
can restructure those core US equity
414
:exposures in a way that's gonna help you
produce better after-tax results, right?
415
:And so that's where I think advisors
can really step in using some of
416
:those tools we mentioned earlier,
and really help reshape the client's
417
:assets and liabilities, right?
418
:And align it in a way that
matches their overall tax profile.
419
:Mm-hmm.
420
:Yeah.
421
:Going back to the investment alpha,
generating alpha now is so difficult
422
:with markets as efficient as ever.
423
:Then you have, you know, such high
concentration in those 10 names, big tech,
424
:makes it very difficult to generate alpha.
425
:So like you said, there's a lot of
other ways to generate alpha that
426
:doesn't involve the investment
part, which is very difficult.
427
:So very good points.
428
:You discussed strategies and p-
earlier, like, you know, we have the
429
:long-short overlays, we have exchange
fund, y- this Section 351 exchanges,
430
:which are becoming very popular
now, variable prepaid forwards, and
431
:other sophisticated planning tools.
432
:Which of these do you believe are becoming
mainstream for advisors working with high
433
:net worth clients, and which maybe remain
underutilized despite their potential?
434
:I would say, Ryan, I think all of
them except one that you mentioned
435
:are starting to go very mainstream.
436
:And, you know, we talked to a number of
folks, um, earlier this, uh, year in May.
437
:My friend Brent Sullivan, you know, he
had his inaugural event BASIS Northwest.
438
:We congregated about 300-plus investors,
advisors, allocators, and asset
439
:managers, and it was really exciting
to hear the buzz around this stuff.
440
:Like, everyone was thinking about
after-tax as well as pre-tax returns.
441
:Everyone was very familiar
with the toolkits.
442
:Uh, the asset managers that were there
were continuing to innovate and, you
443
:know, evolve in this, uh, solution set.
444
:So it's a really exciting time there.
445
:I did think, though, that the one area,
the one, you know, kind of solution that
446
:has not gotten as much traction, which has
surprised me, is the Section 351 exchange.
447
:Um, you know, I saw this stuff
firsthand in:
448
:was working on an ETF company.
449
:Uh, but at this point, you know,
we're hearing that there's a lot
450
:of interest kind of building up,
but there's also a knowledge gap.
451
:I think one from the advisor side, and
two from the individual investor side.
452
:You know, there's times maybe it sounds
very complicated and perhaps very
453
:difficult operationally to pull off.
454
:Uh, but a number of firms have
made this very accessible.
455
:And then for the right person,
like it could be a really, really
456
:great sort of tax efficient way to
offload some of these concentrated,
457
:you know, highly appreciated stock
positions you mentioned earlier, Ryan.
458
:Like, the top 10 names in the
S- have grown tremendously.
459
:You can take that, diversify it
into something broader, like an
460
:S&P 500 exposure, uh, in a very
tax-deferred, efficient manner.
461
:Yeah, you're exactly right.
462
:I've had some conversations
on the 351 exchanges.
463
:I do think that, like you said, the
knowledge gap there, it might sound more
464
:confusing than what it is, the paperwork.
465
:And again, it goes back to
your personal experience.
466
:You know what?
467
:You might liquidate a big holding
in, like, a tech company all of
468
:a sudden, or you give one share.
469
:You're working for NVIDIA, and you've
got this huge holding in NVIDIA.
470
:It's run up.
471
:Now, what do you do with it?
472
:You know, you don't want this
huge tax obligation, so great,
473
:uh, great opportunities there.
474
:One point that I believe is very
interesting that you have mentioned
475
:is that client portfolios should
evolve around life events, like,
476
:uh, business sales, IPOs, equity
compensation, retirement, you name it.
477
:Normally, you know, I've done
a lot of research on this about
478
:rebalancing and what's the best
rebalancing year, quarterly, monthly.
479
:Typically, I say
rebalance on a year basis.
480
:But you're saying do it
more around life events.
481
:How can advisors create a more
dynamic planning process that
482
:proactively captures tax opportunities
before these events occur?
483
:Yeah, absolutely.
484
:And you know, I, I, I believe so
strongly that, you know, these key
485
:life events, inflection points are
where advisors can really move the
486
:needle and add tremendous value.
487
:Um, not just from, like, a pure
quantitative perspective of, like,
488
:after-tax returns, but also, you know,
from just support, empathy, like, you
489
:know, having prior experiences helping
other clients navigate it, assuring
490
:the folks that are going through this.
491
:Um, you know, valuable both
from a quantifiable as well
492
:as qualitative perspective.
493
:Um, but yeah.
494
:And exactly.
495
:You know, whether it's, you know,
something as simple as, "Hey, we wanna
496
:get married," "We wanna start a family,"
"We wanna buy a house," or, "I'm selling
497
:my company," or, "My company just went
public," you know, or, "I wanna sell
498
:this other asset on my balance sheet,"
or something like that, um, these
499
:are major moments in people's lives.
500
:And for advisors to be able to step in
with not just great advice and empathy
501
:and, you know, assurance that they're
gonna help navigate this process, but
502
:also bring these tools to the client,
show them how we can thoughtfully combine
503
:them to best align with their goals,
their objectives, their needs, right?
504
:That's so valuable.
505
:And so, you know, when I think of
when we thought about how we were
506
:gonna launch our firm, you know,
of course, a couple of years ago,
507
:we started laying the groundwork.
508
:It was…
509
:You know, we wanna be able to
offer a solution that is helping
510
:quantifiably add value and remove
friction from a client's life.
511
:You know, I could go out there and
give general planning advice, talk
512
:about retirement, but these things
are a little bit farther off in
513
:time and perhaps not as visceral.
514
:But if we can step in at an inflection
point in a client's life and really
515
:add a ton of value, I think that
makes me feel like I'm adding,
516
:you know, more to the client, and
the client sees this real well.
517
:So that's why I'm a big fan of just, like,
focusing on these inflection points where
518
:we can help out Yeah, that's fantastic.
519
:And it goes along with
the whole entire planning.
520
:Plan ahead, whether it's tax planning,
financial planning, estate planning.
521
:It's very important.
522
:Yeah.
523
:Shane, great conversation.
524
:Let's finish up.
525
:Bring out your crystal ball
here real quick, and let's,
526
:uh, fast-forward five years.
527
:What do you think will separate the
leading advisory firms from everyone else?
528
:And will tax-aware portfolio
construction become a standard
529
:like financial planning is today?
530
:And, um, you know, years ago
when I started, not many advisors
531
:do- did financial planning.
532
:Now they have to.
533
:It's like table stakes.
534
:Do you think tax-aware portfolio
construction will be the same?
535
:I, I think so, and I think that it's gonna
be sort of table stakes, you know, five
536
:years, you know, out where, you know,
individual advisors are gonna have to
537
:have a strong grasp of these solutions.
538
:And they've just become so
democratized, you know, so popular.
539
:You know, they're being covered in the
media, and so people are reading about
540
:them and learning about them, and they're
gonna have questions for advisors.
541
:So, you know, it's important for us
to really get a strong understanding
542
:of how these tools work, how they
can help, what are the trade-offs.
543
:There's no free lunch, right?
544
:There's risks, but there's also benefits.
545
:Um, and really getting a
grasp of that, I think that's
546
:gonna be sort of table stakes.
547
:The other thing I- I'll say, too,
is, you know, and I sort of obviously
548
:have a, you know, horse in this race
in that we are an independent SECRA.
549
:I do think that we're gonna
continue to see growth of the
550
:independent channel, right?
551
:Obviously, you can work with an advisor
at a bank, a brokerage, you know, a
552
:broker-dealer, wirehouse, uh, as well
as an independent, you know, firm.
553
:And part of the reason is that because
the product set is evolving and there's
554
:so much proliferation of just the sheer
number of products, the complexity,
555
:independent advisors are very well
situated to adopt these very quickly,
556
:to, you know, be very agile and, you
know, c- fast in the decision-making and
557
:ultimately help clients implement it.
558
:So, you know, I think we'll continue to
see the growth of the independent channel.
559
:Perhaps a lot of advisors will jump in,
like myself, and launch their own firms.
560
:But it's all a very exciting
time to be an advisor.
561
:Yeah, you are exactly right, Shane.
562
:That's a great way of wrapping up this
conversation because, like you said,
563
:there-- Investment management, offering
mutual funds, ETFs, just individual
564
:stocks, it's y- it's commoditized, right?
565
:It's commoditized.
566
:Investors, they can go,
you know, Robinhood.
567
:They can go online and get basically
all those different investments.
568
:What I think is gonna separate
themselves, you know, being
569
:independent so you can offer different
planning services like tax planning,
570
:tax-aware portfolio construction.
571
:That's really how you're gonna be
able to separate yourself, and I
572
:think that's where we're gonna be
moving forward, you know, in five
573
:years is more the relationship
building versus a transaction.
574
:And exactly what you said, everything
that we've talked about really point
575
:goes to that picture, that direction
of, you know, relationship building.
576
:Absolutely.
577
:Shang, thank you so much
for coming on the show.
578
:Great conversation.
579
:I learned a lot.
580
:Really fascinating stuff.
581
:I love talking about the different
ways of building portfolios, evolving
582
:from modern portfolio theory to, you
know, more tax planning, tax alpha
583
:generating, the three dimensions.
584
:Fantastic stuff.
585
:Really fun.
586
:Where can our listeners get more
information about Dishme Capital?
587
:Yeah.
588
:Um, I'm very reachable, whether it's on
LinkedIn or Twitter, you can find me.
589
:Um, you can visit our website.
590
:Uh, I have a personal blog I run.
591
:It's just www.taxalphashang,
592
:uh, .com.
593
:And, you know, I…
594
:That's where I publish some of
the writing that we do, uh, as
595
:well as, you know, things like
podcasts like this event, Ryan.
596
:So folks can visit that and,
and watch and read some more.
597
:So more than welcome to reach
out anytime if anyone wants
598
:to continue the conversation.
599
:Yeah.
600
:Fantastic, Shang.
601
:Thank you.
602
:And thank you everyone for listening.
603
:You can watch all of our other episodes
on YouTube and all the other platforms
604
:you listen to your favorite podcasts.
605
:Please be sure to like and
subscribe to those channels and
606
:give us a follow on LinkedIn.
607
:Thank you very much and have
a great rest of your week.
