Which individual at your firm is responsible for basis support? Do they have complete executive support? Do they understand all the requirements and challenges associated with calculating cost basis correctly? Is this position considered tactic (fulfilling the letter of the law) or strategic?
Even the best cost basis systems are challenged by poor transaction data. Unfortunately, most back office systems were not designed with cost basis in mind. Any vendor that claims that cost basis comes down to proper calculations has a limited understanding of the broader issues with cost basis. Firms should insist on a data review and expect to modify internal procedures to ensure the highest degree of basis accuracy.
The ability to process transactions correctly, from a cost basis perspective, determines the volume of daily exceptions. A high exception rate leads to significant maintenance and support costs for financial institutions. Databases and cost basis systems must have a strong tax lot framework, including the ability to handle wash sale sub-lots and other complex calculations.
Does your firm have the necessary resources to support cost basis? This is a question of expertise, not numbers. No amount of determined analysts can match the ability of a few key subject matter experts.
H.R. 1424 made basis reporting a hot-button topic, but maintaining adjusted cost basis is by no means a singular event. Basis rules change, tax law changes. Strategically, basis can be for tax management and to improve existing services, such as performance reporting and portfolio rebalancing. How far is your firm prepared to take cost basis?
Is your firm prepared? Sign-up for our free Cost Basis Audit today.
Cost Basis Reporting: What firms need to know about mandatory reporting requirements.
Celent Report - Online Brokerages: Technology and the Customer Experience.
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