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Legacy Positions

Contents

Introduction

Strategies to Sell the Legacy Position

Immediately Sell the Legacy Position

Gradually Sell the Legacy Position

Sell when the Legacy position turns into a long-term gain

Strategies to Hold or Buy the Legacy Position

Exclude the Legacy Position From Account Value

Hold The Security

Buy the legacy positions rather than model Securities

Set a Security as a Legacy Position

 

Introduction

Legacy positions, sometimes called legacy holdings, are positions that clients have within their accounts that don't necessarily fall within your ideal models for that client's account.

Example

A new client opens an account with you. One of the submodels that will be assigned to his account is the Large Cap Technology Security Level model. However, the client is bringing in holdings in AMZN which is not within your model. AMZN is not in your models, so it is considered a legacy position.

The client wants to continue to hold AMZN and have it count towards allocation to Large Cap Technology. You add AMZN to Large Cap Technology and make it a rank-based model. You give the legacy position, AMZN, a 0% target.

During future rebalances, Advisor Rebalancing will examine the holdings in this model based on your settings. If the model is underweight, Advisor Rebalancing will purchase the three securities with a target. If the model is overweight, Advisor Rebalancing will recommend a sell of AMZN because of its 0% target, the lowest in the model.

Here are some examples of why an account might hold legacy positions:

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Strategies to Sell the Legacy Position

As you work with clients, your clients' holdings, account types, and strategies will guide your decisions about what to do with their legacy positions. Below are the most common strategies used to sell legacy positions:

Immediately Sell the Legacy Position

Some firms prefer not to hold legacy positions in accounts because of firm policy or for efficiency reasons. In these situations, do not include the legacy position in your models. Next, you can liquidate the legacy position and reinvest the proceeds into your model targets. This can be done in one of two ways: 

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Gradually Sell the Legacy Position

In some cases, you might not want to sell the entire legacy position all at once. In situations where the legacy position is a large portion of the account or where the legacy position has a substantial gain, you may want to gradually sell the security by selling out of the position over time. You can also sell the position on an as-needed basis.

In these situations, do not include the legacy position in your models. Next, you can gradually sell the positions over time. This can be done in one of two ways:  

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Sell when the Legacy position turns into a long-term gain

Most firms prefer not to take a short-term gain, especially if it matures into a long-term gain in a short period of time. In these situations, follow these guidelines to sell the legacy position as a long-term gain: 

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Strategies to Hold or Buy the Legacy Position

As you work with clients, your clients' holdings, account types, and strategies will guide your decisions about what to do with their legacy positions. Below are the most common strategies used to hold or buy legacy positions:

Exclude the Legacy Position From Account Value

One option is to consider the legacy position an unmanaged security. This is appropriate for clients who want to hold the legacy position but the advisor doesn't want that security counted towards the account's allocations.

In these situations, do not include the legacy position in your models. Next, set the legacy position as unmanaged. This can be done in one of two ways:  

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Hold The Security

In some cases, the client does not want to buy or sell the legacy position, but you may want the security to count towards the account's allocation. In these situations, apply a hold restriction to the legacy position. This can be done in one of two ways: 

Next, you can make the legacy position count towards an account's allocations in one of two ways: 

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Buy the legacy positions rather than model Securities

For some accounts, the legacy position is a close proxy to an existing security within your models, and buying more of the legacy position is appropriate. In some cases, a mutual fund in a model becomes soft close and can only be purchased by accounts that already hold the fund.

In cases like these, take one of these steps: 

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Set a Security as a Legacy Position

To make a security a legacy position, follow these steps:

  1. On the Models menu, click Security Level Models.

  2. In the Select a Security Level Model list, choose the model where you want to designate the legacy position, and then click Edit next to that security.

  3. In the dialog that appears, select the Legacy Position check box and then click Update Security. When you select this option, Advisor Rebalancing will not buy the security for any accounts assigned to the model.

  4. Click Save.

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