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New website supports Section 351 ETF conversions

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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. 

So far, the website links investors to just one product, but more are on the way, Bucklin noted. The fact that the SEC “has never gone after anyone for doing a 351 conversion yet” and the availability of “insurance protection from tax liability” show that advisors and clients who abide by the guidelines are taking a relatively low risk of regulatory pushback against the exchange, he said, crediting Gray with championing the strategy. New ETFs frequently must overcome a classic catch-22 in which they need to attract $50 million in investments to access large wealth management firms’ menus but struggle to find that seeding without being on the giant platforms.

“A lot of ETFs have launched with nothing and just hoped to gather assets, and it’s just really tough to get to $50 million,” Bucklin said. “I’ve seen some great strategies that just get stuck.”

READ MORE: 2025 wealth management trends: Private equity, new ETF debuts

As more products hit the shelf, advisors and clients should keep in mind that they “could have contributions with exposure to double tax” if the issuer and their service providers fail to account for distributions affecting early and later investors, Christensen noted. She finds that “very few people” grasp that difficulty and the need to work with an outside firm to avoid it, she said. Otherwise, they may not be able to tap into the full benefits of a 351 conversion.

“I’m probably a little nervous right now with what’s going on in the ETF space if I’m not actively trying to get into that world,” she said. “It’s a win-win for everyone and allows a newcomer to start with a ‘bring your own assets’ type of strategy. Their clients are already comfortable with how they’re investing their money.”

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IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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