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Schwab Report Reviews Upcoming Cost Basis Reporting Requirements

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Charles Schwab issued a report on Monday, June 21, designed to help RIAs transition to new cost basis reporting requirements mandated by the Emergency Economic Stabilization Act of 2008.

Starting January 1, 2011, custodians and broker-dealers will have to report the adjusted cost basis of sold securities to advisors’ clients and to the IRS on form 1099-B. The requirements will be phased in over three years, starting with equities acquired on or after January 1, 2011, followed one year later by mutual funds, ETFs and dividend replacement investment shares, and one year after that by other securities including fixed income and options.

The Schwab Market Knowledge Tools report, “Preparing for the New Cost Basis Legislation,” reviews the changes in reporting of adjusted cost basis of sold securities, and recommends three steps advisors can take immediately to prepare for the effects of the legislation in order to help improve their clients’ experience and avoid potentially costly and time-consuming last-minute changes.

The report recommends these steps:

? Create a communications plan. Actively contacting clients and offering guidance can allay any anxiety that may arise.

? Anticipate client needs. Some clients may want cost basis information for all securities, including those not covered by the legislation. Others may want only periodic access to information.

? Evaluate the effect on the back office. The report recommends evaluating portfolio management systems to ensure they are in sync with the custodian’s data.

Schwab Advisor Services plans to roll out technology enhancements to enable advisors to more easily stay in sync with the Schwab’s cost basis data, the firm said in a statement. These will include the ability to download and import Schwab’s cost basis data into their portfolio management system and online functionality to provide cost basis instructions on equity trades via Schwab’s online trading platform.

In addition, Schwab Advisor Services will host another in its series of webcasts on June 22 to help advisors understand the cost basis legislation and what it means for their firms, the statement said.

Michael S. Fischer ([email protected]) is a New York-based financial writer and editor and a frequent contributor to


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