Quick Take: To grow AUM beyond market performance, advisors must unlock held-away assets—especially real estate—using tax-advantaged strategies. This article outlines how 1031 exchanges and Qualified Opportunity Zone (QOZ) funds can help clients defer, reduce or eliminate capital gains taxes, generate passive income, and simplify estate planning. These solutions not only solve key client pain points but also drive organic business growth. Advisors can differentiate their practice, deepen client relationships, and attract high-value referrals.
Successful financial advisors help clients compound and protect their wealth. Your practice deserves the same strategy—one built to grow, scale and withstand volatility. But how much of your business growth is tied to market performance?
If you’re finding it hard to increase assets under management (AUM) organically, you’re not alone. From 2019 to 2023, market appreciation accounted for 54% of AUM growth across advisor practices, according to Fidelity. Strip out the market performance, and the picture changes: One in four firms actually experienced negative AUM growth during that time.
A recent Boston Consulting Group study confirms the trend. Only 22% of total AUM growth in North America over the past decade came from organic efforts by existing advisors. In other words, real business growth isn’t just about riding the market—it’s about building resilience.
One of the most overlooked opportunities? Privately held real estate. Below, we outline two proven strategies to help you unlock this often-ignored asset class and grow AUM through real estate conversations your clients are already waiting to have.
Tax Solutions for Clients, Strategic Wins for Advisors
Real estate is often a “held-away” asset whose value can only be unlocked through liquidation of the property. Your clients may hesitate to liquidate their holdings for several reasons:
- They may not be aware of options beyond an outright sale
- They might be unwilling to deal with a complex sales process on their own
- They may fear costly tax consequences that undermine the value of an investment they spent years building
Enter two powerful tax-advantaged strategies: 1031 exchanges and Qualified Opportunity Zone (QOZ) funds. Both can help your clients solve significant tax and estate-planning challenges—and both have the potential to provide passive income streams.
Offering these solutions can drive sustainable organic growth and generate three business benefits:
1. The potential for significant AUM growth: When you help clients transition held-away real estate or business assets through tax-advantaged strategies, you’re creating a new pipeline of managed assets out of previously inaccessible client capital. And you’re limiting your reliance on an unpredictable market to build your book of business.
2. Differentiation and client retention: When you help clients solve their most complex wealth challenges and create a legacy for their family, you can cement client relations and become irreplaceable.
3. Generate valuable referrals: Building a reputation as a trusted advisor can lead to more word-of-mouth referrals. Estate-planning attorneys, CPAs and real estate professionals, among others, are part of the client’s path to securing their financial future. They can be part of your growing network of referrals as well.
Solution: 1031 Exchanges
A 1031 exchange allows real estate investors to defer paying capital gains taxes when they sell an investment property, as long as they reinvest the proceeds into a “like-kind” property of equal or greater value. The exchange holds a tax-deferred status as long as certain guidelines are followed. Using a 1031 exchange to invest in a Delaware Statutory Trust (DST) allows investors to pool their capital and exchange into institutional-quality assets with professional management.
Key Benefits to Investors
- Tax deferral: Federal capital gains, state income and depreciation recapture taxes are deferred, and the basis from the original property rolled over.
- Passive income: Landlords exchange day-to-day management for a passive income stream.
- Institutional-quality real estate: Investors can exchange privately held properties for interest in Class A multifamily assets.
- Simpler estate planning: Beneficiaries can inherit a fractional interest in the investment through an estate or trust, providing asset continuity and tax deferral for families focused on multi-generational wealth transfer.
Find out whether a 1031 exchange is right for your clients with these resources:
What is a 1031 Exchange? Understanding a Powerful Tax-Deferral Strategy
What is a DST? The Benefits of Delaware Statutory Trusts
What is a 721 Exchange? How an UPREIT Works
1031 exchange calculator: Help clients determine how much they could save through a 1031 exchange versus paying taxes on a property sale.
Considerations for Investors
Investors should weigh the benefits of 1031 exchanges against their investment goals. Due diligence and professional guidance are essential.
Illiquidity and direct management: These are long-term investments. And as any homeowner knows, real estate values can fluctuate, impacting both income and principal.
Management: The DST’s performance depends on the quality and stability of the sponsor or property manager who manages the DST.
IRS rules: Strict IRS rules must be followed, including 45-day identification and 180-day closing deadlines; missing these can trigger immediate tax liability.
How Origin can help: Through our low-fee Origin Exchange platform, investors can exchange their properties for DSTs, receiving monthly distributions and the potential for capital appreciation. A further benefit is the potential for the DST’s interests to be acquired by Origin’s IncomePlus Fund in a 721 exchange.
Solution: Qualified Opportunity Zone (QOZ) Funds
The Qualified Opportunity Zone program was created under the Tax Cuts and Jobs Act of 2017 to incentivize investment and economic development in more than 8,000 designated communities throughout the U.S. If your clients are accredited investors considering the sale of an investment or asset, QOZ funds offer a way to defer and eventually eliminate capital gains taxes associated with the sale of assets.
The current iteration of QOZ law is in effect until Dec. 31, 2026. During this time, investors can still access key benefits under the original program. With the passage of H.R. 1 on July 4, a new QOZ law—“QOZ 2.0”—will go into effect on Jan. 1, 2027. The new law makes Opportunity Zones permanent and introduces stricter eligibility, updated tax incentives, and expanded compliance requirements.
Key Benefits to Investors
Here’s how the QOZ program works under the current law:
- Investors can invest any realized capital gains from the sale of assets such as a business, equities, real estate or art, among others.
- Gains from that sale are deferred through 2026 if those gains are invested in a Qualified Opportunity Zone fund.
- The appreciation in that fund is tax-free if the investor holds the interest in the fund for at least 10 years.
- Investors can opt to stay in the QOZ investment and continue earning gains from appreciation tax-free until the QOZ program sunsets on Dec. 31, 2047.
Find out whether investing in a QOZ fund is right for your clients with these resources:
QOZ 2.0: What Changes, What Doesn’t—and Why Investing Now Still Matters
The Tax Benefits of Investing in a QOZ
Five Criteria to Evaluate a QOZ Fund Manager
QOZ investment calculator: Help clients determine how much they could save by investing capital gains in a QOZ fund versus a non-QOZ investment.
Considerations for Investors
Investors should weigh tax-advantaged strategies such as a QOZ investment carefully with professional guidance. Here are a few considerations:
Illiquidity: Investors typically need to hold QOZ fund interests for at least 10 years to maximize tax benefits.
Increased scrutiny: Legislative and regulatory risk has increased with the passage of H.B. 1, which made QOZs permanent but introduced stricter eligibility, compliance and reporting requirements. Market and project risk: The underlying real estate is subject to market conditions, and outcomes depend on the fund manager’s expertise and integrity.
How Origin can help: Our QOZ Fund III invests in properties in fast-growing markets with the goal of producing stable cash flow.
Build Your AUM by Addressing Three Key Client Needs
Advisors who capture held-away real estate assets as part of tax-advantaged strategies act on three critical client pain points.
Diversify portfolios: Clients with concentrated wealth in real estate or businesses want diversification but may fear capital gains taxes that can exceed 30% in high-tax states. By offering tax-advantaged real estate strategies like QOZ investments, you transform a seemingly insurmountable obstacle into a solvable problem where clients can defer and potentially reduce taxes on their initial investment. Plus, they can access the “holy grail” of tax-free gains on new investments held for at least 10 years.
Remove management burden: Many clients have accumulated rental properties or business interests. As they age, they seek professional management solutions without tax penalties. This is particularly true for high-net-worth individuals looking for low-maintenance investment options that still beat inflation. Offering institutional-quality alternatives solves both problems.
Ease estate planning concerns: Clients worry about passing complex real estate portfolios or business interests to heirs who lack expertise or interest in managing them. Tax-advantaged solutions, particularly 1031 exchanges, can be carried forward indefinitely. That allows heirs to receive a step-up in basis based on the inherited property’s fair market value at death, wiping out earlier appreciation in value.
Case Studies: Transforming Held-Away Assets into Advisory Relationships
Below, find out how three hypothetical clients were able to keep more of their wealth, create the potential for long-term cash flow, and build a legacy for their families.
Case Study 1: Diversifying Concentrated Stock
Client: 62-year-old tech executive, nearing retirement, with $4.2 million in highly appreciated company stock (cost basis of $350,000).
Challenge: If he sells the stock, he faces about $920,000 in capital gains taxes; wants diversification.
Solution: His advisor recommends selling the stock and investing the proceeds in a QOZ fund.
Outcome: The client defers taxes until 2026, eliminates taxes on new QOZ gains (if held for 10-plus years), and diversifies into institutional-quality multifamily real estate. The advisor brings more than $4 million under management and strengthens their relationship as the client’s primary financial advisor.
Case Study 2: Reducing Management Burden, Simplifying Estate Planning
Client: A 75-year-old widow with $3.1 million in rental properties that she manages personally.
Challenge: She finds property management increasingly stressful, but her three children aren’t interested in taking over.
Solution: Her advisor suggests a 1031 exchange into Delaware Statutory Trusts (DSTs), with potential for UPREIT conversion.
Outcome: The client defers about $450,000 in taxes, eliminates onerous management duties and simplifies her estate planning. Her heirs will eventually receive a fully stepped-up cost basis, potentially eliminating capital gains taxes altogether. The advisor brings assets under advisement, with the potential to build a multi-generational relationship.
Case Study 3: Business Sale and Real Estate Diversification
Client: A 58-year-old entrepreneur selling her business for $12 million (zero basis).
Challenge: She faces about $2.8 million in capital gains taxes and wants to invest in real estate, but she has no expertise in property selection or management.
Solution: Her advisor recommends investing $8 million in a QOZ fund.
Outcome: The client defers about $1.9 million in taxes and gains diversified real estate exposure. The advisor brought the sale proceeds under management, increasing their AUM and building their reputation as a holistic advisor who handles sophisticated tax strategies and significant liquidity events.
Stand Out with Tax Strategies that Work
Implementing advanced tax-planning strategies is a powerful way for advisors to differentiate their practice, strengthen client relationships, and drive organic growth. At Origin, we partner with advisory firms to integrate 1031 exchanges and QOZ investments solutions into their everyday client conversations.
Contact us today to receive:
- Client-ready educational materials
- Case study examples with implementation roadmaps
- Sample client conversation guides
- Access to our tax strategy specialists
