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Can fund industry learn from broker-dealer's tax reporting?

Broker-dealers have become the futurologists of the asset management industry. From what I have seen, the broker-dealer’s experience has affirmed the mutual fund transition to mandatory cost basis reporting will not be fully completed until 2012 IRS Information Reporting is completed.  For this reason, funds need to monitor and validate cost basis activity daily to ensure success.  Timely implementation of system changes for Form 1099-B reporting will allow fund companies and their transfer agents to thoroughly test forms production and reduce risk going into the 2012 tax season. 

Also essential, is the communication strategy to shareholders about the reporting changes and preparations that can be developed prior to the 2012 tax season.  This can involve mailings, enhanced call center scripts, or highlighting online tools which help shareholders better understand their own cost basis situation – such as hypothetical calculators, online cost basis statements, and explaining customers’ cost basis calculation methods. 

Finally, staffing should be evaluated to ensure the appropriate resources are available for timely responses to shareholder questions, corrective action which may need to be made to either books and records or cost basis data. Throughout the year ahead, shareholders or through the coaching by their tax preparers, may question gain/loss calculations, cost basis methodology used, and request account updates that may or may not be permitted from a statutory perspective. Having a well-prepared team of customer support agents that use effective software tools to effectively guide shareholders through these considerations can be a deciding factor in whether the fund company retains a valued investor or loses that all important customer.



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