Funds usually employ a staff of analysts and researchers who sift through stocks looking for the best investments, and they charge an array of fees for providing this service. Fund managers trade stocks on behalf of their funds' investors. Folios, on the other hand, are managed by advisors themselves, who have complete control over which stocks to include in Folios. They can buy and sell stocks on behalf of clients. Taxable distributions vs. control .
Clients have little control over the taxes that stem from their mutual fund distributions.
They also decide whether to own stocks that pay dividends. If they do purchase dividend-paying stocks, they are required to distribute those dividends to the fund shareholders. The tax burden from capital gains and dividends are passed on to fund investors in the form of a taxable distribution. Because fund managers do all the trading, fund investors have no way to control this tax burden. For example, it lets advisors minimize or maximize capital gains for clients when they sell stocks by using tax lots.