Total Cost of Ownership is Driving More Firms to Leverage Third-Party Cost Basis Reporting Providers, Study Reveals

Celent identifies trends impacting cost basis reporting costs, and reveal what financial institutions are doing beyond Phase III requirements to get the most out of their investments

JERSEY CITY, N.J., — Jan. 8, 2014Scivantage®, an independent financial technology provider with proven expertise in online brokerage, tax and portfolio reporting and wealth management applications, and Celent today released findings from a new report titled, “Cost Basis Reporting: Reducing Total Cost of Ownership,” examining the increasing emphasis among firms on the long-term impact of cost basis reporting (CBR). The research, commissioned by Scivantage, pushes the discussion around CBR beyond compliance and reveals that firms are seeking ways to maximize their CBR investments.

Nearly 60 interviews were conducted with broker-dealers, mutual funds, transfer agents, custodians, prime brokers, and technology providers to understand the full spectrum of CBR regulation implications. Since 2011, institutions leveraging a third-party CBR provider have rated their CBR systems higher than those who used an in-house solution, according to the report. Additionally, their collective perspective on the costs of those systems has evolved to include the full impact of the regulations on existing workflows and operations. There remain gaps and challenges that the report has identified as areas of increased focus, including consolidating and integrating systems, increasing collaboration across systems and heightened client service. The value-add functionality has become a much higher priority, adding in another factor to the total cost of ownership, according to the organizations surveyed in this report.

“The results from our research demonstrated that many firms have been stymied by the high costs associated with developing their own CBR solutions whereas third-party providers have used their expertise and economies of scale to optimize processes, reducing costs and enhancing client service,” said Isabella Fonseca, Research Director, Celent.

“Until recently, cost basis reporting has only been viewed as a regulatory requirement needed to provide transparency to the IRS,” said Job Dennison, VP, Product Management, Scivantage. “As firms have delved further into these mandates, it has become clear that CBR is a multi-faceted process and the total cost of ownership goes further than just the cost of your technology. Resources, specific tax expertise, operational processes and technology all factor in to how clients leveraging our Maxit solution are able to maximize their CBR systems beyond compliance.”

Additional key report insights include:

  • Total spending on cost basis reporting has ranged from $2 million per year to well in excess of $15 million per year. This total cost includes software costs, maintenance, staffing, and operations.
  • Nearly 86% of firms expect to increase or keep their CBR spending in 2014 and 2015 at the same level
  • Staffing and operations consistently required the highest amount of budget needed for in-house systems
  • Consulting services regarding regulations, tax expertise and improving operations are increasingly becoming more important to organizations
  • Poor data quality, typically the result of poor integration or operational processes, is leading to more costly data scrubs needed to optimize the data
  • Consolidating systems, third-party solutions, hiring or expanding relationship with BPO provider and data management tools were indicated as the most common methods firms are considering to lower CBR costs

To read the full report, “Cost Basis Reporting: Reducing Total Cost of Ownership,” visit Scivantage’s site to download the research:

About Scivantage

Scivantage is an independent financial technology provider with proven expertise in online brokerage, tax and portfolio reporting, and wealth management applications that automate and integrate key business practices for broker-dealers, mutual funds, custodians and prime brokers. From trade order processing and account management to comprehensive cost basis reporting and automated account opening, maintenance and funding, Scivantage’s back-office independent solutions enable financial institutions and financial professionals to dramatically reduce operational costs, strengthen customer relationships and improve productivity. For more information, please visit or contact us at +1.866.724.8268.

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Posted in Press Release.