As financial advisors and their clients learn more about the potential tax advantages of a Section 351 ETF conversion, a new website aims to connect issuers with investors.
351conversion.com founder Matt Bucklin “cannot make money” through “transaction fees or anything like that” by providing advisors, investors and ETF issuers with informational resources and possible products to use in an increasingly popular asset migration method named for a provision of the Tax Code enabling exchanges of similar products. Securities and Exchange Commission rules from 2019 and 2020 for active management of ETFs, along with the development of financial technology, have led to a bumper crop of products offering tax deferral for investors with low-basis stocks and separately managed accounts.
“It could be a great time to diversify out of certain highly appreciated securities,” Bucklin said in an interview. He promised not to “bombard” people who sign up on his website with emails but simply “put them in touch with the ETF issuer” if a new product fitting their preferences is coming to market. “I have done a lot of online marketing, ecommerce and things, and I’ve never put up a website that gets ranked organically on Google,” Bucklin added.
READ MORE: How to unlock tax savings in incoming client portfolios
Bucklin came up with the idea for the site when he was speaking with Wes Gray, the founder of technology and asset management firm ETF Architect and an innovator in the approach. An influx of new products may obscure how the tool for deferring, rather than avoiding, capital gains distributions could create “a little bit more tricky scenario” if the issuer is, for example, not using sophisticated management of the tax lots in an ETF based on the differing needs of seed and second-day investors or ensuring their choice to do the conversion is “in line with how you expect your funds to be managed on the forward,” said Brittany Christensen, the senior vice president of business development for ETF service and technology firm Tidal Financial Group.
“Everyone wants the easy, ‘I’m out of all my Nvidia, and I don’t have to pay taxes on it,'” she said. “There are also other factors to consider before really making the decision to go down that path. The solicited transactions are a relatively new phenomenon and might be hitting some people’s inboxes with these marketing campaigns.”
The rules carry requirements about the level of stock concentration in the incoming assets and the need for the strategies to be the same on both sides of the transition.
