We are increasingly living in a world of open (but secured) data access between financial services providers and technologies that ingest that data to support consumer (and their advisers) experiences.
Over the years Financial Simplicity has integrated with many investment platforms and we have noticed a few trends and observations as to the different types of data feed content and formed some views of what good looks like in feeding portfolio decision support platforms like Financial Simplicity.
Referring to the attached diagram, the base data feed case is a feed of client account portfolio holdings. This generally consists of the following pieces of data:
a.) An investor account identifier
b.) Identification of an investment security / fund / instrument
c.) A number of units held off that investment / security / fund / instrument – perhaps split into:
a. Traded units (preferred) and / or
b. Settled units
This provides sufficient details to let a receiving system know ‘who owns what’.
Moving up the scale to the right is the adding of
d. Valuations or prices
With this information, the data feed extends to ‘what owns what at what value’
Another path of detail is the progress of breaking down a holdings position into tax lots, the component positions that make up the holdings position. This is essentially the deemed tax lot positions that include:
e. Tax lot purchase data
f. Tax lot purchase price
And this provides additional information to help portfolio decision technologies understand the capital gains tax position of the client portfolios. An alternative to this is to be fed the history (or accumulating history) of the transactions from which the tax lot position is derived from. This is useful where the sourcing platform does not provide an essential ‘books and records’ accounting position for each investor.
An extension of the base tax lot information is to actually provide from an accurate tax lot perspective:
g.) Effective CGT purchase data (as this may differ from e) above if there are the history of corporate actions
h.) CGT Cost basis of the tax lot considering the costs basis considering the tax laws of the jurisdiction
With this information then it provide the real tax accounting data to derive unrealised capital gains tax positions.
The final stage however is if all this information is combined with the valuation of each investment also to include:
i.) Tax lot Unrealised capital gain
j.) Tax lot valuation
Which really then defines the true balance sheet position for an investor portfolio being both the value of the assets and the tax liabilities that may be associated with such.