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Introduction
Your reconciliation tolerances allow you to set tolerance bands around the transaction criteria for a trade. The transaction amount includes dollar traded, as well as any fees applied to the trade. Tolerance amounts can be set in several ways, including number of shares, dollars, and percent of transaction criteria.
You can set tolerance ranges for shares, dollar amounts, fees, and other transaction data separately for mutual funds, equities, and other security types. Advisor Rebalancing then uses your tolerance settings to determine which trades can be automatically reconciled. Those trades that fall outside of the tolerance settings can be manually reconciled.
Consider this example:
Example
You place a trade in a client's account to buy 1,000 shares of ABC at $50 a share, for a total position of $50,000. The trade was only partially filled at the custodian.
The order won't automatically reconcile, so you review the executed trade. During your review, you find that the trade quantity doesn't match the original buy order because of commission added at the custodian. In addition, the custodian was unable to fully fill your buy order. Your client now shows a position of 970 shares of ABC at $50, plus a $1,000 commission, for a total of $49,500.
You examine your ETFs/Equities reconciliation tolerances:
For Shares, your Lower Tolerance is set at 10 shares. This trade is 30 shares lower than expected, so the trade is not within this tolerance band.
For Dollars, the Lower Tolerance is set at $5. The filled quantity of the client's order is $500 less than the order amount, so the trade is not within this tolerance band, either.
Because this order won't automatically reconcile, you can now manually reconcile this trade. You can also use this as an opportunity to adjust your commission settings or adjust your reconciliation tolerances as needed.
For more information on the ways to reconcile trades in Advisor Rebalancing, including automatic and manual reconciliation, see Reconciliation Process.
Auto-Reconciliation and Reconciliation Tolerances
Once a trade has been executed, reconciliation occurs the following business day. Advisor Rebalancing allows you to automatically reconcile trades using the tolerance bands you enter on the Reconciliation Tolerances page. In addition, the following must match for a trade to auto-reconcile:
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Account number
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Trade type (buy, sell, etc.)
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Symbol
Depending on the transaction, Advisor Rebalancing uses the following logic to determine which trades can be auto-reconciled:
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ETFs/Equities: For equities and ETFs, as long as one field matches exactly, in either the Shares or Dollars fields, differences in other fields are ignored and the transaction will auto-reconcile.
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Mutual Funds: For mutual funds, as long as any of the tolerances match, with the exception of Trade Date and Total Fees, the trade will auto-reconcile.
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Percent of Transaction Amount: You can set a reconciliation tolerance using the Percent of Transaction Amount fields. This amount takes into consideration the dollars traded, as well as any fees applied to the trade. A 1% tolerance would auto-reconcile trades where the total amount of the trade is within 1% of the actual transaction amount.
IMPORTANT
Before reconciling trades, be sure you set the upper and lower reconciliation tolerances for Percent of Transaction Amount. If you do not set these tolerances, trades that previously would have auto-reconciled may no longer reconcile as expected.
Best Practices
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Leave all Shares and Dollars fields at 0, your Percent of Transaction Amount fields as 0, and use $1 for Total Fees tolerances. This ensures that those transactions that are truly accurate will auto-reconcile. If problems arise in future reconciliation, you can identify them early and adjust accordingly.
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In general, equities trades should match share-for-share while mutual funds trades should match dollar-for-dollar.
Troubleshooting Related Settings and Fees
If you find your trades are not auto-reconciling in the way you expect them to, consider the following settings and fees. These can affect your trades:
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Fee Schedules: Make sure your fee schedules are accurate, especially for mutual funds with fee schedules that are out of the ordinary. If your fee schedules are accurate, you can keep tolerance amounts low because Advisor Rebalancing will take these fees into consideration in your orders. For more information, see Learn More About Fee Schedules.
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Commission: Equity Per Trade Commission and Equity Per Share Commission are account-level settings that apply to equity and ETF orders and can affect whether or not trades can be auto-reconciled. Ensure these settings are correct for the accounts in which you are trading.
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Trade File Group Settings: The Trade File Group Settings page allows you to adjust certain securities to be transaction fee funds or allows you to make those funds exempt from redemption fees. These settings can affect a successful auto-reconciliation if you're not charging the correct fees for a trade. For more information, see Trade File Group Settings.
Update Your Reconciliation Tolerances
To adjust your reconciliation tolerances, follow these steps.
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On the Setup menu, click Reconciliation Tolerances.
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Choose the type of security to which you'd like to set your reconciliation tolerances: Mutual Funds, ETFs/Equities, or Other.
Note
Other reconciliation tolerances are most often used for "dummy" tickers.
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Type your tolerance amounts in the following fields:
Field More Information Shares The lower and upper range Advisor Rebalancing will allow when comparing the number of shares between orders and trades during auto-reconciliation. Dollars The lower and upper range Advisor Rebalancing will allow when comparing total dollar value between orders and trades during auto-reconciliation. Percent of Transaction Amount The lower and upper range Advisor Rebalancing will allow when comparing the total transaction amounts. The transaction amount includes dollars traded as well as any fees applied to the trade. Total Fees The lower and upper range Advisor Rebalancing will allow when comparing total fees between orders and trades during auto-reconciliation. Trade Date The number of days beyond the defined date range specified that Advisor Rebalancing will look at in searching for matching orders during auto-reconciliation. -
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