Most of your clients probably prefer to have your management fees deducted from their accounts, but some clients may want to send you a check instead.  If your management fee is paid outside of the client’s brokerage accounts, it will not be downloaded through the interface like your deducted fees.  You need to take some extra steps to provide your clients who pay by check with net of fees performance returns.

PortfolioCenter calls this transaction an External Fee Payment and the Management Fee Wizard in the Transaction Writer can create the external fee payments for you.

The Management Fee Wizard creates a deposit of cash and a management fee on the same day for the same dollar amount to cover the amount of the fee.   External fee payments account for the effect of the management fee on Net Returns, but do not affect the cash balance of the portfolio.

Generally you should process your external fee payments on the same day you transmit your deducted fee payments — after your quarterly data is complete and reconciled and you have verified that PortfolioCenter calculated all fees correctly.

The Management Fee Wizard creates the external fee payment using the data in the account’s billing history.   If the billing history is not correct, (for instance if you gave the client a discount or refunded a portion of the fee),  the external fee payment will not be correct either.  Before processing external fee payments, proof and verify all your external fee payments just like you proof your deducted fees.

To quickly and easily create External Fee Payments

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PortfolioCenter® by Schwab Performance Technologies is a Windows®-based data management and reporting software application.