Reconcile Transaction
Contents
A reconcile transaction is a special transaction which is created from a position sent by a clearing house.
Positions are used to compare the shares calculated by Advisors Assistant with position sent. If the amounts differ by more than the tolerance set in the Investment System Preferences, then a reconcile transaction is created for that asset so that the shares match.
Reconcile transactions show as blue on the View Screen.
Why Reconcile Transactions
Reconcile transactions are used to:
1.Initialize an account. When you first download a seasoned account, you don't usually get back history. You will get a position and an initial reconcile transaction will be created to establish a beginning balance in the asset.
2.Missing Transactions. Sometimes the transaction is just not downloaded. When Advisors Assistant creates a large reconcile transaction this will raise a "red flag" that something is wrong. You will want to pursue this with your BD, download source, or Fund Family.
After each download, be sure to check the Exceptions Report from the download when you see a large reconcile. The exceptions report will contain any transactions which were not processed. Sometimes a clearing house will add transaction codes without notice. Until one of those codes is used and we are notified, those transactions will appear on the Exceptions Report.
3.Rounding errors. Sometimes transactions may use 2 decimal precision, but the account and the position are carried at 4 or 6 decimals. Reconcile transactions can take care of rounding errors.
Reconcile Transaction Tolerance
In the case of rounding, the System Administrator can set a preference that will tell the reconcile routine not to create small transactions. This rounding amount can be over ridden on security by security basis in the Modify Securities Information Screen for an individual security.
For example: If the asset is .0001 shares different from the position, a reconcile transaction on a $10 stock will represent less than one cent. However, .0001 shares of Berkshire Hathaway A shares is a significant amount of money.
Reconcile Transactions From Downloaded Positions
Most reconcile transactions are created from a downloaded position which does not match the shares in Advisors Assistant. When a position is downloaded, Advisors Assistant will automatically calculate the number of shares in the asset for the date of the position. If the number of shares is off more than the Reconcile Tolerance, a reconcile transaction will be created for that asset.
Checking Reconciles
When you see during the download that you received positions, you should look for any reconciles. You can do this by checking the Process Results Screen or by running the Reconcile Utility. This will show you all the reconciles for a download source within a date range.
You can sort the Transaction Shares column on this screen. By sorting big to small, you can see if there are any reconciles larger than what might be a rounding error.
For example, if you have a 7.34 share adjustment, you may have missed a dividend in your download. If you have many reconciles across all accounts on the same day, you may have missed an entire day of files from that download source.
Reconciles tell you when problems may exist and they should be investigated immediately. If you wait weeks, until you are doing reports, it may be too late to get the right files from the download source.
Reconcile Effect On Rate Of Return
Reconcile transactions are treated like Buy or Sell transactions where the flow is from the client. The exact effect on rate of return will depend on why the reconcile occurred.
For example, if the reconcile replaced a dividend or interest, it would lower the rate of return. If the reconcile was because of a missed purchase or withdrawal, it would have no effect on rate of return.
Reconciles affect Additions and Net Additions. Since a reconcile adds shares or subtracts shares, it adds or subtracts from additons on both the account and asset levels. The funds used in the reconcile are assumed to come directly from the client.
Reconcile Transactions have the same effect on basis as a buy or sell transaction.
See Also
View/Modify Reconciled Positions