Bridge over ocean
29 June 2023 Financial Analysts Journal Volume 79, Issue 3

Personalized Multiple Account Portfolio Optimization

  1. Thomas M. Idzorek, CFA
The author proposes an alpha-tracking error framework that simultaneously optimizes across accounts with different tax treatments, tax lots, and investments while considering taxes, trade costs, and nonpecuniary preferences in a single optimization.
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Author Shares What Motivated the Research


I develop a multi-account alpha-tracking error framework that simultaneously optimizes across an investor’s multiple accounts with different tax treatments, existing holdings, tax lots, and opportunity sets while considering taxes and trade costs in a single optimization. The objective function includes an optional term for an investor’s nonpecuniary preferences, such as various environmental, social, and governance (ESG) characteristics. By running the multi-account optimizer regularly, it also serves as a personalized asset location optimizer, tax-loss harvester, portfolio rebalancer, roll-over optimizer, and new client onboarding transition optimizer that simultaneously considers the numerous interconnected tradeoffs to produce ongoing personalized portfolio management.

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