Cost Basis Solutions: Are You Maximizing Value?

Whether your firm built an internal cost basis system or outsourced to a vendor, you’ve likely spent millions on a solution and your team dedicated significant resources to ensure compliance with the latest cost basis rules. On the surface, it all seems to be running smoothly – yet you can’t shake this nagging feeling that your system doesn’t yield much strategic value.  Or maybe in diligent fashion, it’s just time for a little self-evaluation.

Based on our work constructing and implementing cost basis systems, we naturally put a premium on compliance. Those are table stakes. However, just being compliant won’t ensure that you’re able to maximize the value from your investment. We’ve identified numerous areas in which firms can do more with cost basis than just file 1099s.

Let’s take a look at the most common areas:

Automation and Accuracy – Automation is central to an efficient and accurate system.

Many firms have implemented solutions that continue to rely modestly on or in some cases heavily on an army of humans supporting the system to manage data issues. Obviously, any manual component increases the likelihood of errors, from corporate action processing to transfer statement generation. And frequently, systems dependent on humans lack robust administrative tools to help manage the most common challenge in Cost Basis calculation: data cleansing.

Portfolio accounting systems that have been retrofitted to become cost basis systems are notorious for manual workarounds and questionable data accuracy.

But perhaps the greater issue is reprocessing. Not only are many systems rife with time-intensive manual processes, but they are limited in their capability to accurately manage change because they rely on edited tax lots rather than cost basis derived by a series of transactions. As a result, it becomes necessary to re-engineer individual tax lots – a painstaking process plagued by potential inaccuracies.


Integration – A single, integrated cost basis is the Holy Grail.

Many systems are burdened with poor integrations, resulting in discrepancies with the back office positions and problems with consistent data presentation. For example, a cost basis system that doesn’t act as an extension of the firm’s back office results in having to two sets of data to reconcile. This invites errors which lead to further client dissatisfaction and potentially a lot of resources being reallocated inefficiently. Additionally, these firms lack the flexibility to present cost basis data throughout their trading and portfolio pages, leaving them challenged to compete with firms that have already done so.

Innovation – Don’t miss the big data opportunity.

Cost basis information is becoming an essential part of the client experience yet firms are struggling to seize on the opportunity. Cost basis calculation generates a vast amount of foundational, granular data to help service your clients better and drive insights around client segmentation and trading trends.  Many homegrown or outsourced systems lack the data analytics capabilities necessary to derive meaningful insights into trading trends, from individual holding periods to the tendencies of an entire trading desk.

Data Access – Getting what you want, when you want it.

Increasingly a pain point for many firms is an inability to extract the data they need to run custom reports, feed a downstream system on demand or troubleshoot on the fly. Many systems do not store data in a processed state and are limited to creating and constantly recreating data masters as opposed to providing a continuous window into the tax lot data store. As a result, data masters must be compared to distinguish deltas, requiring an additional process and hurting efficiency while disrupting downstream functions.

In addition to the ease of access to data, consider the frequency of data updates. Daily batch is fine for 1099 reporting, but if you really want to maximize the value of your investment, you should strive for real-time cost basis updates. It won’t improve the 1099 process, but it will allow your advisors and clients to leverage the data for tax management purposes.

That’s the point when you’ll stop just thinking of cost basis as a compliance cost center and more as a strategic advantage for your firm.

Reliability — Managing cost basis is now a year-round process.

All firms are becoming increasingly dependent on the availability of accurate data 24-7 to meet clients’ needs. Cost basis reporting has moved from a peripheral service straight to the heart of tax reporting in a few short years.  Today, tax reporting is no longer a year-end event, but an integral part of daily operations driving the client experience. Many firms we have talked to expressed concern about the ability of legacy systems to perform consistently in light of these new demands.

 Total Cost of Ownership

Building a system internally, especially if it requires integration with a legacy system adds layers of complexity. And the less automated the solution, the higher the cost and greater risk of inaccuracy and errors. A fully integrated, outsourced solution can lower the total cost of ownership over the long term. A robust platform like Maxit, can reduce firm resources required and allow firms to leverage a wide range of premium reconciliation services designed to support operational and strategic needs. While each firm is different, a system like Maxit has proven to provide significant savings over alternative commercial or homegrown systems by up to 50%.

Cost basis systems are a significant investment of time and money. In this era of heightened cost sensitivity, your system needs to add strategic value by enhancing the internal process and the client experience. The best systems ultimately provide a competitive advantage and differentiator.

Interested in better understanding your system’s potential? Contact Cameron Routh, Chief Commercial Officer, Tax & Analytics, ( to learn more about how to evaluate and maximize your cost basis solution.


As Chief Commercial Officer, Tax & Analytics, Cameron Routh is responsible for the overall vision, leadership and management of Scivantage Maxit® and analytics products. Under his direction, Scivantage has developed the next generation of investment management applications, including pre-trade decision tools
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