Wealth Management Portfolio Rebalance
Analyze portfolio allocation drift and generate tax-aware rebalancing trade recommendations across multiple account types.
Portfolio drift creeps in silently -- a strong equity run pushes allocations out of band, but rebalancing across taxable and tax-advantaged accounts without triggering unnecessary capital gains or wash sale violations requires careful coordination that spreadsheets make tedious and error-prone.
Who it's for: wealth managers, financial advisors, private bankers, family office managers
Example
"Rebalance the Garcia household across all accounts" → Drift analysis showing 4 asset classes outside IPS bands, 12 recommended trades prioritizing tax-advantaged accounts first, $0 estimated short-term gains, and a before/after allocation comparison
New here? 3-minute setup guide → | Already set up? Copy the template below.
# Portfolio Rebalance
description: Analyze portfolio allocation drift and generate rebalancing trade recommendations across accounts. Considers tax implications, transaction costs, and wash sale rules. Triggers on "rebalance", "portfolio drift", "allocation check", "rebalancing trades", or "my portfolio is out of balance".
## Workflow
### Step 1: Current State
For each account, capture:
- Account type (taxable, IRA, Roth, 401k)
- Holdings with current market value
- Cost basis (for taxable accounts)
- Unrealized gains/losses per position
### Step 2: Drift Analysis
Compare current allocation to IPS targets:
| Asset Class | Target % | Current % | Drift | $ Over/Under |
|------------|----------|-----------|-------|-------------|
| US Large Cap Equity | | | | |
| US Small/Mid Cap | | | | |
| International Developed | | | | |
| Emerging Markets | | | | |
| Investment Grade Bonds | | | | |
| High Yield / Credit | | | | |
| TIPS / Inflation Protected | | | | |
| Alternatives | | | | |
| Cash | | | | |
Flag positions exceeding the rebalancing band (typically ±3-5%).
### Step 3: Trade Recommendations
Generate trades to bring allocation back to target:
**Tax-Aware Rebalancing Rules:**
- Prefer rebalancing in tax-advantaged accounts (IRA, Roth) first — no tax consequences
- In taxable accounts, avoid selling positions with large short-term gains
- Harvest losses where possible while rebalancing
- Watch for wash sale rules (30-day window) across all accounts
- Consider directing new contributions to underweight asset classes instead of trading
**Trade List:**
| Account | Action | Security | Shares/$ | Reason | Tax Impact |
|---------|--------|----------|----------|--------|-----------|
| | Buy/Sell | | | Rebalance / TLH | ST gain / LT gain / Loss |
### Step 4: Asset Location Review
Optimize which assets are held in which account types:
- **Tax-deferred (IRA/401k)**: Bonds, REITs, high-turnover funds (highest tax drag)
- **Roth**: Highest expected growth assets (tax-free growth)
- **Taxable**: Tax-efficient equity (index funds, ETFs, munis), tax-loss harvesting candidates
### Step 5: Implementation
- Total trades by account
- Estimated transaction costs
- Estimated tax impact (realized gains/losses)
- Net effect on allocation drift
### Step 6: Output
- Drift analysis table
- Recommended trade list (Excel)
- Tax impact summary
- Before/after allocation comparison
## Important Notes
- Don't rebalance for rebalancing's sake — small drift within bands is fine
- Tax costs can outweigh rebalancing benefits in taxable accounts — calculate the breakeven
- Consider pending cash flows (contributions, withdrawals, RMDs) before trading
- Check for any client-specific restrictions (ESG, concentrated stock, lockups)
- Document rationale for every trade for compliance records
- Wash sale rules apply across accounts — coordinate trades across the household
What This Does
This playbook analyzes portfolio allocation drift against Investment Policy Statement (IPS) targets and generates rebalancing trade recommendations. It considers tax implications, transaction costs, wash sale rules, and asset location optimization across taxable, IRA, Roth, and 401(k) accounts to minimize tax drag while bringing allocations back within target bands.
Important: This workflow assists with rebalancing analysis but does not provide financial advice. All trade recommendations should be reviewed by qualified professionals before execution.
Quick Start
Step 1: Create a Project Folder
mkdir -p ~/Documents/PortfolioRebalance
Step 2: Download the Template
Click Download above, then move the file into your project folder as CLAUDE.md.
mv ~/Downloads/wm-portfolio-rebalance.md ~/Documents/PortfolioRebalance/CLAUDE.md
Step 3: Start Working
cd ~/Documents/PortfolioRebalance
claude
Try these prompts:
"Analyze allocation drift for the Thompson household"
"Generate rebalancing trades for my IRA and taxable accounts"
"Check if any positions exceed the 5% rebalancing band"
Tax-Aware Rebalancing Rules
The playbook follows these priorities to minimize tax impact:
- Rebalance in tax-advantaged accounts first -- IRA and Roth trades have no tax consequences
- Avoid short-term gains in taxable accounts -- Selling positions held less than a year triggers ordinary income rates
- Harvest losses opportunistically -- If rebalancing requires selling a position at a loss, capture the tax benefit
- Watch wash sale rules -- 30-day window applies across all household accounts
- Use new contributions -- Direct incoming cash to underweight asset classes instead of trading
Asset Location Optimization
The playbook also reviews whether assets are held in the optimal account type:
| Account Type | Best For | Reason |
|---|---|---|
| Tax-deferred (IRA/401k) | Bonds, REITs, high-turnover funds | Highest tax drag assets sheltered from current taxation |
| Roth | Highest expected growth assets | Tax-free growth maximizes the Roth advantage |
| Taxable | Tax-efficient equity (index funds, ETFs, munis) | Low turnover and qualified dividends minimize tax drag |
Best Practices
- Don't over-rebalance: Small drift within bands is fine -- rebalancing has costs (taxes, transaction fees, tracking error)
- Calculate the breakeven: In taxable accounts, tax costs can outweigh rebalancing benefits
- Check pending cash flows: Contributions, withdrawals, and RMDs may naturally correct drift without trading
- Client-specific restrictions: Check for ESG constraints, concentrated stock restrictions, or lockup periods
- Document everything: Record the rationale for every trade for compliance records
- Household coordination: Wash sale rules apply across all accounts -- coordinate trades across the entire household
Example Prompts
"Analyze drift across all accounts and flag anything outside the 3% band"
"Generate a tax-efficient rebalancing plan for a household with taxable and Roth accounts"
"What's the estimated tax impact of rebalancing the taxable account?"
"Should I rebalance or wait for the next contribution to correct the drift?"