Technology Update

Are you ready for cost basis reporting?

Nov 12, 2007 @ 12:01 am

A "nightmare" is how Shami Kaur, an adviser and certified financial planner with SK Financial Alliance in Cedar Knolls, N.J., describes dealing with cost basis issues and their tax ramifications.

For advisers such as Ms. Kaur, the problem may only worsen if the Tax Reduction and Reform Act of 2007 becomes law.

If the House bill is enacted, advisers will be required to provide cost basis reporting for stock acquired after Jan. 1, 2009, and all other instruments acquired after Jan. 1, 2011. The rule would apply to securities in existing accounts as well as securities transferred into accounts managed by the adviser.

Complying with a cost-basis-reporting requirement "will not be cheap, and it will not be easy, but it is clearly something that Congress is intent on doing," said Travis Larson, a spokesman for the Securities Industry and Financial Markets Association of New York and Washington.

Mr. Larson said that broker-dealers will bear the brunt of the compliance expense, and he thinks that for many of the larger broker-dealers, meeting the requirements would be a matter of reconfiguring their services and software.

For independent or small firms, especially those that hadn't already begun to lay the foundations for meeting the requirements, the outlook may not be as good.

"For those that aren't doing any reporting now, it will be a tough row to hoe. That's why we're calling for the 18 months of implementation time [before the legislation goes into effect]," Mr. Larson said.

Some advisers already have tools in place.

John D. Bochniak, a registered investment adviser and CFP with Compass Financial Consulting LLC in Atlanta, said he isn't worried about compliance, because between his software and custodian, his bases are covered. His firm, which has just over $100 million in assets under management, uses TD Ameritrade Holding Corp. of Omaha, Neb., as its custodian.

"Essentially, the software we use [from Interactive Advisory Software LLC of Marietta, Ga.,] takes the cost basis data from our custodian and allows us to export it into an Excel spreadsheet," Mr. Bochniak said.

Several other vendors and service providers offer applications that can assist advisers in their efforts to comply with whatever reporting rules are mandated.

Here is a brief look at five tools:

AccuBasis is a web-based calculator offered by The Depository Trust and Clearing Corp. of New York in partnership with Networth Services of Phoenix. It provides cost basis data for a client's holdings on a transaction basis using the security name, symbol or CUSIP number and date of purchase. Introduced this past January, the service is available on an enterprise level or by buying bundles of transaction searches, which start at $400 for 25. For more information, visit

Albridge Solutions of Lawrence-ville, N.J., has a tax lot interface built into its wealth-reporting platform that company officials say is little known and thus far little used. The interface synchronizes the Albridge database to that of a participating custodian to provide a history of an investment since its inception. Albridge works with 20 clearing firms and custodians. The interface is available at no extra cost to subscribers. For more information, visit

BasisPro and GainsKeeper are products of Wolters Kluwer Financial Services of Minneapolis. Like AccuBasis, BasisPro is an online historical cost basis generator for individual securities that provides realized and unrealized gains and losses. It is available directly and as part of Intuit's TurboTax product. Access to Basis Pro is based on calculations purchased, with 25 costing $349.

GainsKeeper is an online tool that allows an adviser to track realized and unrealized gains and losses of all the securities in a client's portfolio. Some 5,000 advisers use the tool through broker-dealers.

Information about both products is available at

Maxit, from SciVantage Inc. of Jersey City, N.J., is an application that is integrated within the portfolio management platforms of four broker-dealers. It is expected to be available through eight broker- dealers by the middle of next year. Maxit takes into account an investor's combined holdings, the length of time held, current prices and the investor's tax bracket to assist advisers in minimizing a client's tax burden. More information is available at

Davis Janowski can be reached at


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