Messes You Can Avoid by Reconciling Your Account Data Daily

By Brian Gannon, Technical Relationship Manager on Thursday, March 3rd, 2011

Rare is the advisory firm that doesn’t understand the importance of reconciling account data. For most, it’s about as much a given as meeting with clients. Surprisingly though, far more common is the firm that doesn’t see the need to reconcile data on a day-to-day basis. If I were to ask an RIA how often their firm reconciles their custodial data, they might say every couple days, weekly, maybe even bi-weekly—and I might think that they’re not crazy. But I doubt it.  To me, reconciling your accounts once-a-week is like washing your dishes once-a-week—checking your oil once-a-year or going for a physical once-a-decade—you just don’t let it go that long. And the longer you do, the greater the mess and harder it is to clean. 

Messes you can avoid by reconciling your account data daily:

A manageable task becoming an overwhelming, time-consuming burden. We all know the reconciliation process can occasionally be a challenge, and may at times even seem like a chore, but—like the dishes—for every day it doesn’t get done, the higher the stack will be for the next.   After a few days, you find yourself faced with a much larger quantity of data to reconcile, which in itself can be very time consuming, not to mention that whatever problems you discover in the process must now all be addressed at one time (as opposed to dealing with them individually as they come in). Why spend a day on a mountain when you could spend ten minutes a day on a mound?  

An undetected minor error escalating into a major problem.   Investment professionals should reconcile daily much for the same reason as doctors/physicians give their patients periodic check-ups:  the sooner you find something wrong, the easier it is to fix it. For example, say a receipt of shares didn’t post on a Tuesday due to missing market value. Any subsequent sells or transfers you (as the advisor) make prior to reconciling your data will have been made in the dark without the knowledge of having insufficient shares.  Should you reconcile the following Tuesday, you could’ve already made a week’s worth of consequential errors before even detecting a slip.  

Risking a client relationship on an inaccurate report. Inconsistent data reconciliation can easily result in inaccurate fee/bill statements, many times due to the risk of values being under-or-overstated.   Worse even than undercharging for your services, if a client were to discover an inaccuracy in a report, this could put both your entire client relationship in jeopardy and professional reputation on the line. Neither the possibility of this happening, nor your client’s ability to recognize such an inconsistency should be underestimated.   If you’re a good wealth advisor, and if they’re your client, that means they care about their investments, and have trust in your ability to guide them without stagger, misdirection or imprecision. 

Also if you’re a good wealth advisor, that means you most likely reconcile your data on a daily basis. 

To learn ways to make your reconciliation process faster and more efficient, check out the on-demand replay of Brian's webinar“Tips and Tricks for Reconciling in PortfolioCenter”.  Watch Now!

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