Retrieval-augmented generation vs. deterministic tax computation in multi-agent financial advisory: A 2x2 factorial experiment

Abstract

Tax-loss harvesting demonstrates consistent benefits to long-term portfolio growth; yet implementing it efficiently often involves complex considerations that are specific to the holdings within that portfolio and the individual who owns it. We introduce a custom capital gains calculation engine and a RAG-retrieved vector store of market advisory reports to provide context for a multi-agent trade recommendation system. We investigate the effects of each context provider on the quality of recommendations, measured by relative capital gains incurred during portfolio liquidation. A 2x2 repeated-measures ANOVA revealed a significant main effect of the tax optimization engine ($F(1,29) = 9.17$, $p = .005$, $η^2_p = .240$): enabling the engine reduced tax savings by approximately 55 percentage points relative to the no-engine conditions. The RAG main effect was not significant ($p = .841$), nor was the interaction ($p = .553$). The RAG-only condition achieved the highest descriptive mean tax savings (47.7%), and the baseline condition performed second-best (30.6%), suggesting that the pre-trained language model's internalized financial knowledge may be sufficient for competent tax-loss harvesting recommendations without explicit tooling. These results indicate that augmenting LLM agents with domain-specific computation engines does not guarantee improved performance and may introduce conflicting optimization signals.