The latest SEC audit I helped one of my managers navigate included a request for “names of advisory clients lost, including the reason, termination date and asset value at termination.”
The challenge was extracting this data from PortfolioCenter. Names and dates are relatively easy to retrieve if you handle dropped clients well. Asset value at termination is a problem.
If you followed my recommendations for handling closed accounts, you could easily create a smart set of accounts with a “date closed” within the time period requested.
Asset value is the problem. Best practices include zeroing closed accounts so you don’t waste time updating prices that are no longer needed or risk mistakes when computing global numbers like total assets under management or composite returns. Yet if you empty closed accounts, the value at termination will be zero — by definition. So what to do? I came up with three options.
- Option 1: Check with your broker who may be able to produce the asset value at termination for you, especially if you can give them a list of account numbers and dates.
- Option 2: Track the information in PortfolioCenter by creating a custom field called “Termination value.” To use it you would need to run a holdings report on the date of termination and manually update the field. While this system would work, it requires a fair amount of manual intervention, unnecessarily increases the size of the database, and offers no easy way to verify your value should the SEC challenge it.
- Option 3: Run a holdings report before closing the account and save that report in your client file. If you have electronic client records, you can save it to PDF in the appropriate folder. Using the Unrealized Gain/loss report as your valuation report gives you the added benefit of cost basis and a record of each trade lot. This process requires less manual intervention and gives you the ability to verify your numbers. But it will require some effort when you need to retrieve the data but hopefully, you won’t ever need to retrieve it.