Firms need to look at cost basis reporting as an opportunity for increased returns, not as a cost center
JERSEY CITY, N.J. — June 28, 2011 — Scivantage, a leading provider of Web-based, front- and middle-office technology solutions to the financial services industry, and Celent, a research and consulting firm focused on the application of information technology in the global financial services industry, today announced the results of a research report that examines the state of the industry, post implementation of the cost basis reporting rules from the Internal Revenue Service (IRS). Study participants include broker-dealers, mutual funds, transfer agents, custodians and prime brokers. In 2010, many firms found themselves with insufficient time to properly search and select an appropriate cost basis reporting solution that fit their long-term needs and, subsequently, plan to do a second round of search and selection within the next two or three years, according to the report.
With the 2011 tax season having come to an end, many institutions are now looking to enhance their cost basis reporting systems for next year with various client-facing tools, including online account access and the ability to change tax lot selection online. In addition, given the complex requirements for fixed income products in 2013, firms are now revisiting their search and selection process for a cost basis reporting solution, the Celent research shows.
Isabella Fonseca, research director of wealth management at Celent and co-author of the report, said, “Cost basis regulations were significantly more complicated than firms had anticipated. The rush to meet the government’s requirements has led to short-term solutions and a second round of long-term selections. There is no doubt that firms have had to replace or enhance existing technologies to meet legal requirements.” Other major findings of the report include:
- Most firms expect their budgets for cost basis reporting solutions to increase over the next 12 to 24 months.
- Of the respondents that face a build/buy outsource decision, a majority have selected third party vendor solutions, as the cost of enhancing in house systems was too high.
- Research participants indicated that they plan to increase their operational headcount to meet added call volume.
- Now that larger firms have gotten through integration, they will be looking to extend their cost basis reporting capabilities to help improve processes and procedures for the next tax season.
- All firms agreed that ease of implementation and integration were a key priority in their selection process.
- Most firms listed supporting a variety of lot methods, accurate wash sales and accurate corporate actions adjustments as key capabilities they look for in a cost basis reporting system.
“The study’s findings offer valuable insight into the challenges, best practices and lessons learned as the industry moves toward the second phase of implementation of the cost basis reporting requirements. What began as an operational and compliance challenge for many financial institutions has quickly turned into an opportunity to improve transparency, streamline processes and increase client service,” said Cameron Routh, senior vice president of strategic products at Scivantage. “Scivantage understands that cost basis reporting compliance remains one of the broadest and most complex challenges faced by financial institutions today and we are committed to helping our clients meet reporting requirements, while simultaneously increasing their return on investment.”
To view a full copy of the report, please click here:
Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally experienced analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].
Leading financial institutions depend on Scivantage for essential front- and middle-office applications that deliver transaction-critical data, automate key business processes and drive operational efficiencies. Scivantage’s proven, back-office independent brokerage solutions offer a powerful suite of applications that span the workflow of financial professionals and support the complex investment needs of the retail investor. From online trading and event notification management to automated account opening, maintenance and funding, Scivantage enables financial institutions and financial professionals to dramatically reduce operational costs, strengthen customer relationships and improve productivity. For more information, please visitwww.scivantage.com or contact us at +1.866.724.8268.
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