PORTFOLIOCENTER. Best Practices for Accounting for Transfer of Assets

PORTFOLIOCENTER Best Practices for Accounting for Transfer of Assets

Document ID: SPT011567 Document Date: March 17, 2014 Document Version: 5.8 For institutional audiences only. 2014 Schwab Performance Technologies ( SPT ). All rights reserved PortfolioCenter is a product of Schwab Performance Technologies ( SPT ). SPT is a subsidiary of The Charles Schwab Corporation separate from its affiliate Charles Schwab & Co., Inc. ( CS&Co ). CS&Co is a registered broker-dealer and member SIPC that provides brokerage services, while SPT licenses software and provides related technology products and services. Individual names, account numbers and contact information listed in this document are fictional and not intended to reflect any existing individuals. Both real and fictional securities are listed in the document. Securities and strategies reflected in the document are for educational purposes only and are not, nor should they be construed as, recommendations to buy, sell, or continue to hold any investment nor do the accounts listed reflect individual securities accounts or holdings. Any similarity to an existing individual or account is purely coincidental. Screen shots are provided for illustrative purposes only and may be abridged. This material is meant for educational purposes only and is not meant to provide investment planning, legal, tax, regulatory, nor compliance advice. Consult professionals in these fields to address your specific circumstance. Screen shots are provided for illustrative purposes only and may be abridged. i

TABLE OF CONTENTS WHAT IS A TRANSFER OF ASSETS? 1 OPTIONS FOR ACCOUNTING FOR A TRANSFER OF ASSETS IN PORTFOLIOCENTER 1 Changing the Account NUmbers 1 Using the Account Transfer Wizard 2 Using the Cost BAsis Reset Wizard 3 TRANSFER OF ASSETS CHECKLIST 4 PORTFOLIOCENTER DATA PREPARATION TIPS TO ASSIST WITH TRANSFER OF ASSETS 6 CUSTOM FIELDS 6 DATA MANAGER AND VIEWS 6 GROUPS 7 STEPS FOR THE CHANGING THE ACCOUNT NUMBER METHOD 8 DETERMINING THE ACCOUNT IS DELINKED FROM MASTER OR ADVISOR ID 8 BLOCKING THE ACCOUNT NUMBER IN THE MAPPING TABLE 9 FINDING THE NEW ACCOUNT NUMBER 9 EDITING THE ACCOUNT NUMBER AND PORTFOLIO DETAILS 10 BLOCKING INTERFACE TRANSACTIONS 10 TRANSFERRING CASH AND MONEY FUNDS WITHIN THE ACCOUNT 11 RECONCILING THE ACCOUNTS 12 STEPS FOR THE ACCOUNT TRANSFER WIZARD METHOD 13 DETERMINING THE ACCOUNT IS DELINKED FROM MASTER OR ADVISOR ID 14 POSTING THE NEW ACCOUNT INTO PORTFOLIOCENTER 14 CREATING THE TRANSACTIONS USING THE TRANSACTION WRITER 15 BLOCKING INTERFACE TRANSACTIONS 16 RECONCILING THE ACCOUNT 16 UPDATE GROUPS 17 STEPS FOR THE COST BASIS RESET WIZARD METHOD 18 DETERMINING THE ACCOUNT IS DELINKED FROM MASTER OR ADVISOR ID 19 Best Practices for Accounting for Transfer of Assets ii

TABLE OF CONTENTS POSTING THE NEW ACCOUNT INTO PORTFOLIOCENTER 19 CREATING THE TRANSACTIONS USING THE TRANSACTION WRITER 20 RECONCILING COST BASIS IN THE ACCOUNT 21 UPDATE GROUPS 21 TIPS FOR DATA CLEAN UP 22 TIPS FOR FINDING PROBLEM DATA 22 Sort By Account Numbers 22 Unrealized GAins and Losses Report 23 Small Cash or Share Differences on the Share RECONCILIATION Report 23 TIPS FOR UNPOSTING AND CORRECTING TRANSACTIONS 24 Backup the Database 24 Run Reports before Edits 25 Cancel Sell, Debit, and Transfer Transactions First 25 Edit, Repost, or Enter the Appropriate Transactions 26 Transaction Notes 26 GETTING HELP 27 Best Practices for Accounting for Transfer of Assets iii

WHAT IS A TRANSFER OF ASSETS? There are many reasons that may lead you to having to account for a transfer of assets (TOA), but most commonly you have to account for it if you: move assets from one custodial relationship to another move assets from one account to another (within the same custodial relationship) split assets from one account to another, such as a gift or division of assets While the transactions downloaded from your custodian move the positions from one account to another, they do not handle trade lot and cost basis data you may need to report to your clients. For that reason, we have developed tools and a process to help you keep the information you need for performance and tax estimation information, but with minimal data entry. With a little preparation and planning, the TOA accounting process can be easy. This document is designed to help you prepare for and execute the TOA accounting process before it happens. However, we have developed a section at the end of the document to help guide you to the kinds of information you need to look for and/or research if you have already posted the transaction information. OPTIONS FOR ACCOUNTING FOR A TRANSFER OF ASSETS IN PORTFOLIOCENTER In PortfolioCenter, there are three main methods to help account for the transfer of assets: Changing the account number Using the Account Transfer wizard Using the Cost Basis Reset wizard The following sections walk you through each option in greater detail. CHANGING THE ACCOUNT NUMBERS One of the easiest methods is to change the account number of the existing portfolio to the new account after the transfer. It is as easy as editing the account number on the portfolio details, as well as adding some information in custom fields to help with record keeping. This method is ideal for a one-to-one transfer, such as closing a brokerage account with one custodian and transferring all those assets to a similar account with a different custodian. PROS: Easy data entry you only need to change the account numbers and possibly some additional data we recommend you track in custom fields. Maintain history you can keep all of your trade lot, transaction, billing and performance history without having to re-enter it. Group and Set Maintenance is streamlined keep the same groups and sets you already have. CONS: Some manual entry to account for cash in different funds. Can t be used if the investor is not transferring all assets in an individual account at once. Can t be used if one account is splitting into multiple accounts or if multiple accounts are merging into one account. Best Practices for Accounting for Transfer of Assets Page 1 of 27

WHAT IS A TRANSFER OF ASSETS? USING THE ACCOUNT TRANSFER WIZARD The Account Transfer Wizard creates the transactions required to move assets from the original account to the new one. The wizard, found in the Transaction Writer Wizards, creates a set of transactions (Transfer of Security and Withdrawal) to move the assets out of the original account. It also creates a Receipt of Security for each open trade lot of each position and a Deposit to cash in the new account. This method is ideal for a partial transfer of assets from the original account to the new one or for assets being transferred out of a single portfolio into two or more portfolios. You can also use this method to account for a one-to-one transfer of assets between similar accounts. After processing the transfer of assets, you can create portfolio groups for reporting purposes. Reporting on the group that includes the original account as well as the new account displays the historical information. PROS: Easy to use wizard fill in the date of the transfer and the account numbers you are transferring from and to, and let PortfolioCenter take care of the rest. Maintain cost basis information the wizard creates transactions for each open trade lot and copies the original trade date so that when you sell them, you can still get realized gain information. Transaction notes help you quickly identify the transfer information. CONS: No historical billing or performance information stored on the account level for the new account. Still need to update portfolio details. You may still need to update portfolio details to include the information captured by the custom fields Group Maintenance might be complicated you will have to group together the existing and new accounts to ensure they are accounted for correctly. Best Practices for Accounting for Transfer of Assets Page 2 of 27

WHAT IS A TRANSFER OF ASSETS? USING THE COST BASIS RESET WIZARD The Cost Basis Reset Wizard creates the transactions required to reset cost basis to be in sync with the custodian. The wizard, found in the Transaction Writer Wizards, creates a set of transactions (Debit of Security and Credit of Security) to close the assets within the account and reopen them with the updated cost basis from the custodian. This method is ideal for a transfer of assets from an account that is a new relationship to the custodian and to your firm. After processing the transfer of assets, you can create portfolio groups for reporting purposes. PROS: Easy to use wizard fill in the date of the cost basis reset, which security types to include, which positions to exclude, and the account number you resetting cost basis for, and let PortfolioCenter take care of the rest. Populates cost basis information the wizard creates transactions for each open trade lot and populates the original trade date so that when you sell them, you can still get realized gain information. Transaction notes help you quickly identify the transfer information. CONS: No historical billing or performance information stored on the account level for the new account. Still need to update portfolio details. You may still need to update portfolio details to include the information captured by the custom fields. If you report amortized values for Fixed Incomes or Mortgage-Backs, the wizard resets the cost basis to the unamortized values. Important The custodian should be used as the source of record for client s tax reporting. Even if cost basis is reconciled in PortfolioCenter, unrealized and realized gain/loss figures from the database should only be used as estimates. All reports displaying cost basis information should contain a disclaimer directing the client to the custodian s 1099 for tax reporting. Online Running the Cost Basis Reset Wizard may affect some of the PortfolioCenter reports. For more information about the affected reports, see Using the Cost Basis Reset Wizard. Best Practices for Accounting for Transfer of Assets Page 3 of 27

TRANSFER OF ASSETS CHECKLIST When you transfer assets, whether it is from one custodial relationship to another, or within a custodial relationship, there is a process that needs to take place to ensure the data is entered appropriately. This section gives you a checklist to ensure you are capturing all the steps in order, ensuring a cleaner and faster accounting of the TOA. Fill in and submit paperwork Paperwork: to initiate a transfer of assets, there are usually forms both you and your client need to fill out and submit to initiate the process. You should get confirmation that the paperwork is approved and a date as to when the transfer will take place. Existing Accounts become delinked Once the paperwork is approved, the account is removed from the Master Account or Advisor ID of the original custodian. Be on the lookout in your interface for this missing data. One way you can review it is to run the Reconciliation Report and enable the Missing Accounts setting. The delinked accounts should appear there. Online By default, the Missing Accounts setting is not enabled. For more information about the setting and how to use it, see Working with Missing Portfolios on the Interface Reconciliation Report. Decide on the best method for the account(s) Usually, there is a gap of a couple of days between the account being delinked from the original Master Account or Advisor ID and linked to the new one. Since there are three methods, it is best that, during the time you are waiting for the account to appear that you take the time to evaluate the three methods and decide which one is best to employ for the account(s) you are waiting to receive. Read the Options for Accounting for a Transfer of Assets in PortfolioCenter section starting on page 1 for more information. Important Because there is usually a lag between the time an account is delinked and relinked, there may be transactions that are not captured during this time. Transactions occurring during this time, typically dividends, will not be included in the download for either custodian. If this occurs, the new account will not reconcile and you need to manually enter the transactions to reconcile the accounts. Look for the account in the TOA List Some custodians will send you a daily list of accounts included in the TOA. If you receive one of these files, you should review it daily to look for the new account numbers so you can recognize them in the Portfolios section of the Interface. New Account is Linked Each day you post your interface files, you should be in the best practice of converting and reviewing the details of the Portfolios section of your interface, and be prepared to enter the appropriate portfolio detail information. See the section on PortfolioCenter Data Preparation Tips to Assist with Transfer of Assets starting on page 6 for a list of those suggested data points in the Portfolio Details. Also, if you chose to change the account number of the existing portfolio to match the new portfolio account number, you will change the account number at this time. Best Practices for Accounting for Transfer of Assets Page 4 of 27

TRANSFER OF ASSETS CHECKLIST Important In PortfolioCenter, you can have two unique accounts with the exact same account number defined in the database. Therefore, it is very important that you do not post the new portfolio in to the database if you plan to change the account number. If you have already posted the new account and no transactions are in it, you should delete it before posting any transactions. For more information about cleaning up data once it has been posted, see the Tips for Data Clean Up section starting on page 22. New Transactions Appear for the Accounts The same day you get the new account, you should also receive new transactions for that account that bring the positions into it. You should block those transactions in your interface. Transfer the assets, based on the method you selected in the Options for Accounting for a Transfer of Assets in PortfolioCenter section on page 1. If you chose to change the account numbers, see the Steps for the Changing the Account Number Method section starting on page 8 for more information and steps. If you chose to use the Account Transfer Wizard, run the wizard to create the transactions necessary for the transfer. See the Steps for the Account Transfer Wizard Method section starting on page 13. If you chose to use the Cost Basis Reset Wizard, run the wizard to create the necessary transactions. See the Steps for the Cost Basis Reset Wizard Method section starting on page 18. Reconcile the Account. Run the reconciliation report for the new custodial account to ensure the positions transferred reconcile with the new custodian. Best Practices for Accounting for Transfer of Assets Page 5 of 27

PORTFOLIOCENTER DATA PREPARATION TIPS TO ASSIST WITH TRANSFER OF ASSETS Online PortfolioCenter offers an array of tools to help you manage portfolio data, including the three mentioned in this document. For more information about the data management tools available and links to more in-depth documents, see the document titled Introduction to PortfolioCenter Data Management Tools. There are some data tools you should take advantage of to help assist you with organizing the data. Though these steps are not mandatory, they can help you track key data for accounts that have been transferred. CUSTOM FIELDS Create custom fields to help you keep track of key data about the portfolios that might transfer assets. Some suggestions are: Transferred Account Use this True/False field to track whether or not the account has been transferred to or from another custodian or account type. Date of Transfer use this Date field to track the date of the transfer on both the new account and the existing account. Original Account Number Use this text field to enter the number of the original account for future reference and record keeping. Original Custodian use this text field to create a list of custodians to record the custodian from which the assets were transferred, if applicable. DATA MANAGER AND VIEWS Either create views to use in the Data Manager or on the main portfolios screen that include the custom field data you created above. Use these views to quickly identify clients with accounts that have been transferred and, at an instant, know where they came from and when. Use the Data Manager to quickly update portfolio details for several portfolios at once. Take advantage of time saving tools like find/replace and copy/paste to quickly update fields like Original Custodian and Date of Transfer. Best Practices for Accounting for Transfer of Assets Page 6 of 27

PORTFOLIOCENTER DATA PREPARATION TIPS TO ASSIST WITH TRANSFER OF ASSETS GROUPS If you choose to process the TOA using the account transfer wizard, you will need to take additional steps to maintain your groups. Groups are an important reporting tool in your database and moving assets from one account to another can alter the way you have created groups in PortfolioCenter. Before transferring assets and when evaluating which method you want to use, it is best to assess how you are using groups currently to see how this change fits in with your current configuration. Do you have just one group per household, or many sub-groups per household? If you are using many groups per household, consider streamlining the groupings you have and ensure that both the existing account and the new account have a place in each sub-grouping you create. Be sure you edit the group details to accommodate both the new and existing accounts and make updates to the group printing order, as necessary, so the group members appear in the correct order on PortfolioCenter Reports and Client Report Presentations. Important It is a best practice that, whenever you edit or modify group details, or create a new group, you should recalculate performance intervals for the group to include the new member. Be aware, however, that modifying group membership can alter the performance calculation. Be sure to evaluate your options carefully before modifying existing groups. Best Practices for Accounting for Transfer of Assets Page 7 of 27

STEPS FOR THE CHANGING THE ACCOUNT NUMBER METHOD One of the easiest methods is to change the account number of the existing portfolio to the new account after the transfer. It is as easy as editing the account number on the portfolio details, as well as adding some information in custom fields to help with record keeping. This method is ideal for a one-to-one transfer, such as closing a brokerage account with one custodian and transferring all those assets to a similar account with a different custodian. PROS: Easy data entry you only need to change the account numbers and possibly some additional data we recommend you track in custom fields. Maintain history you can keep all of your trade lot, transaction, billing and performance history without having to re-enter it. Group and Set Maintenance is streamlined keep the same groups and sets you already have. CONS: Some manual entry to account for cash in different funds. Can t be used if the investor is not transferring all assets in an individual account at once. Can t be used if one account is splitting into multiple accounts or if multiple accounts are merging into one account. This section will give you a bit more detail on the steps from the checklist. DETERMINING THE ACCOUNT IS DELINKED FROM MASTER OR ADVISOR ID When the accounts have been de-linked from the Master Account or Advisor ID, they are removed from the reconciliation files. All custodial interface reconciliation files include a setting called Display Missing Account. When enabled, this setting displays accounts found in the mapping table, but not in the provided reconciliation file. For an account to appear on the reconciliation report as a Missing account, three conditions must be met: The account is not in the reconciliation file The account is in the interface s account mapping table, and is not blocked The Closed setting in account details is unchecked. Best Practices for Accounting for Transfer of Assets Page 8 of 27

STEPS FOR THE CHANGING THE ACCOUNT NUMBER METHOD BLOCKING THE ACCOUNT NUMBER IN THE MAPPING TABLE Using the Missing Account feature on the Interface Reconciliation Report is a quick and easy way to identify accounts that have been de-linked from the original custodian. Once you have discovered that the account is de-linked, it is a best practice to block the transactions for that account so that it no longer appears on the Interface Reconciliation Report as a missing account. To block the account: Click the Interfaces tab and select the original custodial interface name on the left. Click the Settings button at the bottom of the window to open the Interface Settings dialog box. In the Interface Settings dialog box, click the Paths and Assignments tab. Click the Account Numbers button at the bottom of the Paths and Assignments tab to open the Account Numbers mapping table. In the account numbers mapping table, similar to the image above, check the box under the Block Transactions column for each account that you want to block, and then click OK to save the changes. FINDING THE NEW ACCOUNT NUMBER Once you have verified that the account number has been de-linked from the original Master Account or Advisor ID, you should start to look for it in the Portfolios section of your interface for the new custodian. Some custodians provide you with a list of accounts that are expected to have a transfer of accounts. If the new custodian provides one, it is a best practice to look at this file daily, especially once you determine that the account has been de-linked. Another best practice you should employ is to convert and review the contents of the Portfolios file each day before posting the file. Using this best practice, you should be able to identify any new accounts in this file in the event you don t get a list of TOA accounts or to validate the list of accounts. Best Practices for Accounting for Transfer of Assets Page 9 of 27

STEPS FOR THE CHANGING THE ACCOUNT NUMBER METHOD Important In PortfolioCenter, you can have two unique accounts with the exact same account number defined in the database. Therefore, it is very important that you do not post the new portfolio in to the database if you plan to change the account number. If you have already posted the new account and no transactions are in it, you should delete it before posting any transactions. For more information about cleaning up data once it has been posted, see the Tips for Data Clean Up section starting on page 22. EDITING THE ACCOUNT NUMBER AND PORTFOLIO DETAILS Once you have verified that the account has been transferred, you can go to the details of the existing account and edit the Account Number. The Account Number field can be found on the Account Tab in the portfolio details. While you are in the details of the account, you might have to edit other details, such as the default cash account for Schwab accounts or the contents of the Custom Fields if you are using them, as described in the PortfolioCenter Data Preparation Tips to Assist with Transfer of Assets starting on page 6. Online For more information about Portfolio Details, see the Entering Portfolio Details document. BLOCKING INTERFACE TRANSACTIONS The best practice for daily interface operation is always to review the data before posting it into the database. This best practice is especially important during an anticipated Transfer of Assets because you do not want to post the transactions you receive from the custodian. When reviewing the transactions, look for receipts of security for the positions and a deposit for the cash into the new account number. If you find these transactions, select and block them. There are two ways to block selected transactions. The easiest is to right-click on the selected transactions and select Block Transaction from the menu, as shown to the right. Another option is to go to the Edit menu on the menu bar and select Block Transaction from the menu. Best Practices for Accounting for Transfer of Assets Page 10 of 27

STEPS FOR THE CHANGING THE ACCOUNT NUMBER METHOD TRANSFERRING CASH AND MONEY FUNDS WITHIN THE ACCOUNT In the case where you are simply changing the account number, it is possible that the cash account or money account at the original custodian will change with the new custodian. The transactions normally required to move the money over to the new cash account were blocked in previous steps, so we have to move the cash manually. This section helps you through that process. This transaction simply moves the money within the portfolio from one cash ID to another and does not impact performance. First, open the original account s transaction list. From the main portfolios list, right-click on the portfolio, now showing the new account number, and click the Transactions menu option that appears in the sub menu. In the transactions screen, similar to the one on the right, enter a Money Transfer transaction for the Cash and Money Funds. Be sure to include the entire amount in the cash account on the date of transfer. Use the $ button to get the total amount if you don t know it. In most cases, the money transfer is all you have to do to move the money over to the account. However, for some custodians, such as Schwab, you might have to set up the default cash account in the portfolio details so that any new transactions coming in go to the correct account. In the portfolio details, click the Account Tab and then click the browse box to the right of the Default Account field and select the correct cash account for the new custodian, and then click OK. Click the Save button on the portfolio details to save the changes. Best Practices for Accounting for Transfer of Assets Page 11 of 27

STEPS FOR THE CHANGING THE ACCOUNT NUMBER METHOD RECONCILING THE ACCOUNTS The best way to determine that the account is fully transferred and that the data in PortfolioCenter is correct is to use the Custodial Reconciliation file. Because there were no other transactions posted, the account should reconcile after changing the account number as long as all the positions have transferred. Once you see the account and transactions in the Portfolio and Transaction files, you should be able to run the reconciliation file without errors. Important Because there is usually a lag between the time an account is delinked and relinked, there may be transactions that are not captured during this time. Transactions occurring during this time, typically dividends, will not be included in the download for either custodian. If this occurs, the new account will not reconcile and you need to manually enter the transactions to reconcile the accounts. There are some instances where the positions do not transfer all at once and you may have a few days where the accounts do not reconcile. For more information about understanding the interface reconciliation report, see Understanding the Share Reconciliation Report and for more information about best practices for reconciliation, see Share Reconciliation Tips and Best Practices. Best Practices for Accounting for Transfer of Assets Page 12 of 27

STEPS FOR THE ACCOUNT TRANSFER WIZARD METHOD Important While you can use this method to transfer assets among accounts that convert into two or more accounts, it requires a lot more manual data entry and attention than described in this document. See Working with the Account Transfer Wizard for more information about complications that can arise from splitting accounts. The Account Transfer Wizard creates the transactions required to move assets from the original account to the new one. The wizard, found in the Transaction Writer Wizards, creates a set of transactions (Transfer of Security and Withdrawal) to move the assets out of the original account. It also creates a Receipt of Security for each open trade lot of each position and a Deposit to cash in the new account. This method is ideal for a partial transfer of assets from the original account to the new one or for assets being transferred out of a single portfolio into two or more portfolios. You can also use this method to account for a one-to-one transfer of assets between similar accounts. After processing the transfer of assets, you can create portfolio groups for reporting purposes. Reporting on the group that includes the original account as well as the new account displays the historical information. PROS: Easy to use wizard fill in the date of the transfer and the account numbers you are transferring from and to, and let PortfolioCenter take care of the rest. Maintain cost basis information the wizard creates transactions for each open trade lot and copies the original trade date so that when you sell them, you can still get realized gain information. Transaction notes help you quickly identify the transfer information. CONS: No historical billing or performance information stored on the account level for the new account. Still need to update portfolio details. You may still need to update portfolio details to include the information captured by the custom fields Group Maintenance might be complicated you will have to group together the existing and new accounts to ensure they are accounted for correctly. Best Practices for Accounting for Transfer of Assets Page 13 of 27

STEPS FOR THE ACCOUNT TRANSFER WIZARD METHOD DETERMINING THE ACCOUNT IS DELINKED FROM MASTER OR ADVISOR ID When enabled, this setting displays accounts found in the mapping table, but not in the provided reconciliation file. For an account to appear on the reconciliation report as a Missing account, three conditions must be met: The account is not in the reconciliation file The account is in the interface s account mapping table, and is not blocked The Closed setting in account details is unchecked POSTING THE NEW ACCOUNT INTO PORTFOLIOCENTER A few days after you have determined that the account was de-linked from the original custodian, be on the lookout for the new account number to appear in the Portfolios section of your custodial interface. It should be a best practice to convert and open the Portfolios diamond each day, especially when you are expecting new portfolios. When you do happen to get new portfolios, the diamond should appear as a Pending status in the interfaces tab when you first convert it. Select the Pending diamond and click the Go to Details button to see if the portfolio you expect is in the file. If you do see the account or accounts you expect, click the name of the portfolio and then click the Go To Details button. Here, you can edit the details of the portfolio to customize the portfolio and make any assignments necessary. If you make any changes, save the changes, and then post the portfolio file. Best Practices for Accounting for Transfer of Assets Page 14 of 27

STEPS FOR THE ACCOUNT TRANSFER WIZARD METHOD CREATING THE TRANSACTIONS USING THE TRANSACTION WRITER The Account Transfer Wizard is a transaction creation tool found on the Transaction Writer tab in PortfolioCenter. The benefit of using this wizard is that it quickly creates transactions moving assets from the original account to the new one while still maintaining cost basis and trade lot data. To use it, you must first create a transaction list, and then start the wizard. On the Transaction Writer tab, click the New button to create a new list, and then in the details of the list, click the Wizards button to select the Account Transfer Wizard. The details of the Account Transfer Wizard are simple: enter the date and price of the transfer, any notes you want to keep track of, and then the accounts you are transferring assets between. Online For more information about the Transaction Writer and Transaction lists, see Using the Transaction Writer document. For other applications for the Account Transfer Wizard, see Working with the Account Transfer Wizard. Once you click finish, you should see a list of all the transactions transferring assets from one account to the other, similar to the example on the right. The transactions you should see are: Transfer of Security out of the original portfolio account number for each position held on the transfer date. Withdrawal of cash out of the original portfolio account number for total amount of cash. Receipt of Security into the new portfolio account number for each open trade lot of each position held in the original portfolio. Deposit of cash into the new portfolio account number for total amount of cash withdrawn from the original portfolio account number. Once you have validated the transactions created for the new portfolio, close the details and post the list, similar to the way you post interface transaction lists. Best Practices for Accounting for Transfer of Assets Page 15 of 27

STEPS FOR THE ACCOUNT TRANSFER WIZARD METHOD BLOCKING INTERFACE TRANSACTIONS The best practice for daily interface operation is always to review the data before posting it into the database. This best practice is especially important during an anticipated Transfer of Assets because you do not want to post the transactions you receive from the custodian. When reviewing the transactions, look for receipts of security for the positions and a deposit for the cash into the new account number. If you find these transactions, select and block them. There are two ways to block selected transactions. The easiest is to right-click on the selected transactions and select Block Transaction from the menu, as shown to the right. Another option is to go to the Edit menu on the menu bar and select Block Transaction from the menu. RECONCILING THE ACCOUNT The best way to determine that the account is fully transferred and that the data in PortfolioCenter is correct is to use the Custodial Reconciliation file. Because there were no other transactions posted, the account should reconcile after changing the account number as long as all the positions have transferred. Once you see the account and transactions in the Portfolio and Transaction files, you should be able to run the reconciliation file without errors. Important Because there is usually a lag between the time an account is delinked and relinked, there may be transactions that are not captured during this time. Transactions occurring during this time, typically dividends, will not be included in the download for either custodian. If this occurs, the new account will not reconcile and you need to manually enter the transactions to reconcile the accounts. For more information about understanding the interface reconciliation report, see Understanding the Share Reconciliation Report and for more information about best practices for reconciliation, see Share Reconciliation Tips and Best Practices. Best Practices for Accounting for Transfer of Assets Page 16 of 27

STEPS FOR THE ACCOUNT TRANSFER WIZARD METHOD UPDATE GROUPS After you have entered the transactions and validated the positions, you are ready to set up the account for reporting, which may include updating groups. If you want historical performance since the inception of the original account, you must create a group of the original account and the new account and then run intervals on the group. If the original account was already a member of a group or several groups, you will have to add the new account to the same group or groups that included the original account. In the details of the group, you may also need to update the group reporting order if you sort any reports or presentations by group members. Note If you report performance on a group, any time you edit or modify group membership, you will need to recalculate intervals from inception. Be sure to back up your database and run reports before recalculating intervals. Best Practices for Accounting for Transfer of Assets Page 17 of 27

STEPS FOR THE COST BASIS RESET WIZARD METHOD The Cost Basis Reset Wizard creates the transactions required to reset cost basis to be in sync with the custodian. The wizard, found in the Transaction Writer Wizards, creates a set of transactions (Debit of Security and Credit of Security) to close the assets within the account and reopen them with the updated cost basis from the custodian. This method is ideal for a transfer of assets from an account that is a new relationship to the custodian and to your firm. After processing the transfer of assets, you can create portfolio groups for reporting purposes. PROS: Easy to use wizard fill in the date of the cost basis reset, which security types to include, which positions to exclude, and the account number you resetting cost basis for, and let PortfolioCenter take care of the rest. Populates cost basis information the wizard creates transactions for each open trade lot and populates the original trade date so that when you sell them, you can still get realized gain information. Transaction notes help you quickly identify the transfer information. CONS: No historical billing or performance information stored on the account level for the new account. Still need to update portfolio details. You may still need to update portfolio details to include the information captured by the custom fields. If you report amortized values for Fixed Incomes or Mortgage-Backs, the wizard resets the cost basis to the unamortized values. Online Running the Cost Basis Reset Wizard may affect some of the PortfolioCenter reports. For more information about the affected reports, see Using the Cost Basis Reset Wizard. Best Practices for Accounting for Transfer of Assets Page 18 of 27

STEPS FOR THE COST BASIS RESET WIZARD METHOD DETERMINING THE ACCOUNT IS DELINKED FROM MASTER OR ADVISOR ID When the accounts have been de-linked from the Master Account or Advisor ID, they are removed from the reconciliation files. All custodial interface reconciliation files include a setting called Display Missing Account. When enabled, this setting displays accounts found in the mapping table, but not in the provided reconciliation file. For an account to appear on the reconciliation report as a Missing account, three conditions must be met: The account is not in the reconciliation file The account is in the interface s account mapping table, and is not blocked The Closed setting in account details is unchecked POSTING THE NEW ACCOUNT INTO PORTFOLIOCENTER A few days after you have determined that the account was de-linked from the original custodian, be on the lookout for the new account number to appear in the Portfolios section of your custodial interface. It should be a best practice to convert and open the Portfolios diamond each day, especially when you are expecting new portfolios. When you do happen to get new portfolios, the diamond should appear as a Pending status in the interfaces tab when you first convert it. Select the Pending diamond and click the Go to Details button to see if the portfolio you expect is in the file. If you do see the account or accounts you expect, click the name of the portfolio and then click the Go To Details button. Here, you can edit the details of the portfolio to customize the portfolio and make any assignments necessary. If you make any changes, save the changes, and then post the portfolio file. Continue through the daily interface operation process by posting the transactions for the account and verifying that it is reconciled. Best Practices for Accounting for Transfer of Assets Page 19 of 27

STEPS FOR THE COST BASIS RESET WIZARD METHOD CREATING THE TRANSACTIONS USING THE TRANSACTION WRITER Note The Cost Basis Reset Wizard can only be used if the custodian for the account provides a cost basis reconciliation file. If the custodian does not provide a cost basis reconciliation file you must input the cost basis information manually. For a list of the custodians that provide download files for PortfolioCenter, see Custodian Cost Basis Reconciliation Information. The Cost Basis Reset is a transaction creation tool found on the Transaction Writer tab in PortfolioCenter. The benefit of using this wizard is that it quickly creates transactions that close out the account s assets and reopen them on the same day with the cost basis provided by the custodian. Before running the wizard, make sure that you first run the most recent Cost Basis Reconciliation report from the custodian and verify that the account is showing up on the report. It might take several days from the time the account transferred in for the cost basis information to be available at the custodian. To use it, you must first create a transaction list, and then start the wizard. On the Transaction Writer tab, click the New button to create a new list, and then in the details of the list, click the Wizards button to select the Cost Basis Reset Wizard. The details of the Cost Basis Reset Wizard are simple: enter the date and price of the cost basis reset, any notes you want to keep track of, the security types you want to include, the positions you want to exclude, and then the account you are working with. Online For more information about the Transaction Writer and Transaction lists, see Using the Transaction Writer document. For additional information on the Cost Basis Reset Wizard, see Using the Cost Basis Reset Wizard. Once you click finish, you should see a list of all the transactions closing the original assets and reopening them with cost basis provided by the custodian, similar to the example on the right. The transactions you should see are: Debit of Security out of the account for each position held on the cost basis reset date. Credit of Security into the account for each open trade lot of each position held on the cost basis reset date. Once you have validated the transactions created for the new portfolio, close the details and post the list, similar to the way you post interface transaction lists. Best Practices for Accounting for Transfer of Assets Page 20 of 27

STEPS FOR THE COST BASIS RESET WIZARD METHOD RECONCILING COST BASIS IN THE ACCOUNT The best way to determine that the account is fully transferred and that the data in PortfolioCenter is correct is to use the Custodial Reconciliation file. Because there were no other transactions posted, the account should reconcile after running the cost basis reset wizard. UPDATE GROUPS After you have entered the transactions and validated the positions, you are ready to set up the account for reporting, which may include updating groups. If the client has other accounts that you manage in PortfolioCenter, you will have to add the new account to the same group or groups that included these accounts. In the details of the group, you may also need to update the group reporting order if you sort any reports or presentations by group members. Best Practices for Accounting for Transfer of Assets Page 21 of 27

TIPS FOR DATA CLEAN UP If you have already posted the data and are now discovering that you have incorrect data, there are some best practices and tips for cleaning up your data. The closer you are to the date of transfer, the better your chances of getting the data cleaned up quickly and efficiently. Use some of the tips below to help you find and correct the data. TIPS FOR FINDING PROBLEM DATA The first step is to correctly identify the problem. The section below provides you with some suggestions and tools for finding incorrect data. SORT BY ACCOUNT NUMBERS Duplicate account numbers is one of the bigger culprits for incorrect data because you can have the same account number defined more than once in PortfolioCenter. This situation usually occurs when you decide to use the Change Account Number method, but change the number after the new account number was already posted into the database. In most cases, you will be able to discover this error quickly because the account will be unreconciled when the transactions begin posting to the newer account. The best way to verify that you are encountering this situation is to sort the accounts in order of account number on the main portfolios screen. Click the Account Number column to sort the accounts in ascending order and then scroll through them to find a duplicate account number. One way to correct this situation is to copy the transactions from one account to the other to merge them together. You can only copy one transaction at a time, so the sooner you detect and find this issue, the less work involved. To copy a transaction, open the new portfolio transaction list, and right-click on the transaction you want to copy. To paste it, open the original portfolio transaction list, rightclick on the numbers to the left and select Paste. Best Practices for Accounting for Transfer of Assets Page 22 of 27

TIPS FOR DATA CLEAN UP UNREALIZED GAINS AND LOSSES REPORT Important The custodian should be used as the source of record for client s tax reporting. Even if cost basis is reconciled in PortfolioCenter, unrealized and realized gain/loss figures from the database should only be used as estimates. All reports displaying cost basis information should contain a disclaimer directing the client to the custodian s 1099 for tax reporting. Another tip for finding incorrect data to look closely at some of the analytical reports you prepare for your client. Usually, you will see position level performance reports with skewed or seemingly incorrect numbers or realized gains or losses that seem unusually high. The best way to see whether or not you have the correct data is to take a look at the open trade lots available in the position. One tool you can use for this analysis is the Unrealized Gains and Losses report, found in Portfolio Holdings reports. In the first example to the right, we see the Unrealized Gains and Losses report for the original account or for an account where the transactions for the transfer are entered correctly. In this account, all trade lots contain the original trade date and a cost basis amount. In the second example to the right, however, we see at least one trade lot that has a zero cost basis, which is usually indicative of a Receipt of Security or Credit of Security transaction that is missing a cost basis value. If you happen to find a transaction with a missing cost basis, you should correct the transaction by canceling it and either using the Change Account Number method or the Account Transfer Wizard method, as outlined in the section Tips for Unposting and Correcting Transactions starting on page 24. SMALL CASH OR SHARE DIFFERENCES ON THE SHARE RECONCILIATION REPORT Small variances of cash or shares (less than a share) on the interface reconciliation report can sometimes indicate an account that has had assets transferred using the Change Account Number method. You can see this minor variance most commonly because the withdrawal of cash or transfer of security out of the account doesn t match the deposit or receipt into the new account number. Generally, the variance is due to activity in the days between the account being delinked from the original custodian and added to the new custodian, usually a cash or reinvested income. Best Practices for Accounting for Transfer of Assets Page 23 of 27

TIPS FOR DATA CLEAN UP TIPS FOR UNPOSTING AND CORRECTING TRANSACTIONS Once you have discovered the problem and where it is, there are some tips you should follow to help clean up the data. Important The closer to the transfer date you are, the easier it is to clean up the transactions and positions. If you find there are too many months of data or too many transactions, you should enlist the help of PortfolioCenter Technical support. See the Getting Help section starting on page 27 for contact information. BACKUP THE DATABASE Before making any changes at all to the data, it is always a best practice to make a backup copy of your data in case you make a mistake with correcting the data. One of the fastest ways of making a backup is to use the PortfolioCenter Database Backup tool, found in the PortfolioCenter Management Console. Online You have many options when it comes to backing up your data and it is important that you have a backup of your data made daily. For more information about creating backup files, see the Database Backup section of our website for a list of documents to help you. Best Practices for Accounting for Transfer of Assets Page 24 of 27

TIPS FOR DATA CLEAN UP RUN REPORTS BEFORE EDITS Run key reports in the account before you start making edits as points of reference in the event you have to manually recreate the transactions or the positions become unreconciled. Be sure to include as much history as possible. Some reports to consider are: Portfolio Holdings or Statement Transaction Ledger Portfolio Interval Audit Position Performance Summary CANCEL SELL, DEBIT, AND TRANSFER TRANSACTIONS FIRST If you find that you have transactions posted after the transfer date that you need to correct, start by cancelling the sell, debit and transfer security transactions first. These transactions can affect and even prevent other transactions such as buys, credits, receipts of security and reinvested income from being canceled. Filter or sort the column by activity to quickly find the closing transactions. Use the CTRL key to select multiple transactions, or use the Shift key to select a block of transactions, and then right-click on the selected activities and pick Cancel from the menu. After canceling the closing transactions, you can select the remaining transactions and cancel them. Best Practices for Accounting for Transfer of Assets Page 25 of 27

TIPS FOR DATA CLEAN UP EDIT, REPOST, OR ENTER THE APPROPRIATE TRANSACTIONS Once you have determined how you are going to handle the transfer either by changing the account number or using the account transfer wizard, you will probably need to edit, repost or enter new transactions in the account. Create a list of all the transactions you think you might need before you enter all the transactions, and run reports regularly to ensure you are on the right path. TRANSACTION NOTES For each transaction you enter or edit, be sure to enter information in the Notes field of the transaction so you can keep track of the edits you made and why you made them. You can also add notes to canceled transactions to explain why you canceled the transaction. This is especially important if you have to manually enter transactions for the transition period between custodians. Best Practices for Accounting for Transfer of Assets Page 26 of 27

GETTING HELP If you find that you need help, there are two teams you can tap for more information, help and troubleshooting. See the table below to be directed to the right team to help you in the right situation: ISSUE Problems with the contents of the interface files If you find that you are missing key data from the interface files, contact the technical support for the appropriate custodian. See a list of custodial interfaces if you need additional information. Problems with data in PortfolioCenter, including incorrect report information for cost basis or performance, modifying portfolio or transaction details, or troubleshooting reconciliation issues CONTACT Custodian Technical Support PortfolioCenter Technical Support Toll free phone support: 1-800-528-9595 Live technical support is available Monday Friday, 8:00 AM 6:00 PM, Eastern Time Email: SPT-Support@schwabpt.com Website: https://schwabpt.com/ Best Practices for Accounting for Transfer of Assets Page 27 of 27