Many of my friends are moving away. Why? To avoid taxes.

I live in “Taxachusetts,” where a “millionaire’s tax,” a 4% surcharge on net income over $1 million, won voters’ approval last fall. My neighbors are like folks I talk with across the country, especially in high-tax states: They realize that taxes, cost and risk are the most critical issues to manage to get the best after-tax portfolio results.

My colleague Paul R. Samuelson agrees. Paul is the co-founder and chief investment officer of LIfeYield. We discussed taxes for the Legends of WealthTech series of my podcast, WealthTech on Deck (listen here).

I asked him about investing fads and his experience over the past 15 years developing technology empowering advisors to limit tax drag and manage risk from accumulation through retirement for an entire household of portfolios.

“The academic finance profession has let people down because they haven’t looked at taxes very seriously,” he told me. “There should have been better formulations of tax calculations and different ways to manage taxes before and after retirement.”

A Career Among Notables
In his career as a portfolio manager and tech entrepreneur, Paul has been a collaborator, colleague and friend of many of the great academicians and economists of our time, including:

• His father, Paul A. Samuelson, the first U.S. winner of the Nobel Prize in economics and author of a classic textbook on macroeconomics.  

• Robert C. Merton, who shared the 1997 Nobel prize with Myron Scholes (yes, of the Black-Scholes model) for his work in finance theory and risk management and his contribution to assessing the value of stock options and other derivatives.  

• Harry Markowitz, also a Nobel laureate, and the pioneer of modern portfolio theory that inspired the growth of mutual funds and other market-hedging strategies.

Paul’s reminiscences of these and others he worked with at Citibank and the Ford Foundation take you through a “who’s who” of modern finance and investing.

I especially enjoy his story of how, cruising the sidelines of his sons’ soccer games, Paul and his dad would field questions from onlookers about improving their portfolios’ performance.

Buy low-cost (securities), hold for a long time, avoid paying taxes—that was the essence of his father’s advice.

Easier said than done.

Paul recalled that verbal advice was insufficient when siblings, in-laws and friends needed help.

“You could give people the broad guidelines, and then if they were trying to figure out what to do, I’d get repeated calls. They would send me a spreadsheet. It would have some of what they held but not other things.

“Very, very few people can do it themselves.”

The Modern Investor’s Dilemma
Most investors today are like Paul’s family and friends. They have multiple accounts—brokerage, 401(k)s, concentrated stock positions through an employer, IRAs and others—in shambles.

They have multiple advisors, and every investor is the target of an industry in thrall with the next, greatest, shiniest product—until the next one comes along.

Paul and his father wrestled with issues of tax-smart investing and decumulation, including as his father, who lived to 94, was aging and found himself with much of his wealth in highly appreciated stock.   

Subsequently, as his in-laws aged, Paul dug into what strategy to use to minimize capital gains taxes on the appreciated stock after one member dies (set up a separate account for the appreciated stock so it steps up at the first death).   

Realizing that these and other problematic tax issues were impossible for most investors and advisors to handle manually, Paul committed to developing tax-minimizing, risk-managing, multi-account software.

“You need software for everything because everything depends on the exact numbers,” Paul said.

Paul said that risk management is complicated by the many investors with concentrated positions, such as in the technology sector. Guiding their investment choices to spread risk is another uphill task advisors have.

“So, if you look at what challenges clients present to advisors, there’s really a wide variety,” he said. “And the advisor needs … to be able to tell a simple story to clients so they can agree to follow his or her recommendation—and continue to do so when their friends suggest, ‘I have this great advisor who visits me on Nantucket.’”

Jack Sharry is the EVP and chief growth officer of LifeYield and host of the WealthTech on Deck podcast. He is on the board of Next Chapter, a leadership community dedicated to improving retirement outcomes.