Cost Basis - Placeholder Entries

Bruce2024

I have about 350 placeholder entries for my Schwab investment accounts going back to 2022. Resolving these is very time consuming because sometimes the lot numbers are off. This is usually due to Quicken downloading a Sale transaction - but it sells shares from the wrong lot! Why can't all the history just be downloaded correctly? Having to go back and fix all these transactions will take hours of work. Is there a way around this?

Thanks,

Bruce

Boatnmaniac

@Bruce2024 -

If I can get Quicken to be within +/-0.5% of actual performance, then I would be satisfied.

This has been my experience over the last few years. Hopefully you will see similar results. I should mention that it did take about a year before it got down to such a small difference. Before then the difference was larger but I seem to recall it still +/-1%. I think what narrowed the difference for me was that I'd placed most of my accounts under professional management a few years ago and they pretty much liquidated most of my securities and replaced them with the ones they wanted. So, it was like starting a clean slate with them. Now they place trade orders frequently enough that even though the Sell transactions are not be accurately tied to the lots in Quicken, there really isn't a whole of of performance difference over the course of a year.

In terms of resolving the current placeholders, do you think it best to just enter an average cost instead of manually entering every missing lot and adjusting the Sale transactions so the correct lots were sold?

It sounds like you are planning to continue trying to assign Sells to specific lots. I think you will find that will be rather time consuming but it will provide the most accurate performance and tax reports/Tax Planner results (assuming your accounts are taxable). If that is really important to you, then you should probably consider getting the missing lots entered with actual costs and not do Add Account with an average cost.

When I used to manage my own accounts, I was pretty diligent about making sure the correct sold lots were properly assigned in Quicken to the Sell transactions. It was made a lot easier for me because I made sure Fidelity knew they were to sell shares on a FIFO basis and I also had Quicken set up the same way. So everything correlated pretty well and it wasn't too time consuming to manage.

But now that my accounts are professionally managed and they do not follow FIFO nor LIFO, I found that it is not practical (much too time consuming) for me to continue trying to make sure accurate lot assignments were being done in Quicken. And since my accounts are mostly IRAs and Roth IRAs I just don't see much value from a tax perspective in lot tracking like that anymore. I still keep my Quicken Preference set to FIFO and just let Quicken automatically match for me. No, it is not accurate but it does allow me to have a bit of a life outside of Quicken. 😏 So, for me, if I were to need to address a lot of placeholders now I would probably just enter Add Shares transactions with average costs.

I can't tell you what you should do because only you can define what is really important to you and what you want to get out of Quicken. Hopefully I've given you enough food for thought so you can make the best decision for your needs and wants.

Tom Young

"I have about 350 placeholder entries for my Schwab investment accounts going back to 2022."

All I can tell you is that downloads from Investment Accounts need your constant attention, You simply can't rely on downloads from the financial institutions to perfectly account for all your investment transactions in many cases. Most garden variety transactions generally will be correctly handled (although sales do need your attention for proper lot selection) but, very commonly, any sort of corporate actions - mergers, acquisitions, spit-offs and the like - are not perfectly reported from an accounting standpoint.

As far as I know there's no "lot" information included with downloaded sales and, again as far as I know, even if lot information was included in the sales transactions Quicken doesn't have the programming to seek out and find individual lots.

Offhand I can't think of any easy way around your problem if you want each and every transaction to be absolutely correct. I think you have to start with 2022 and work forward. I would advise you to not accept Placeholders to be entered automatically into you Transaction List (register) as you're working through this effort.

NotACPA

Also note that, unless you inform Schwab BEFORE THE SALE, they'll always sell FIFO.

Did you inform them of such? If not, explain how you determined that the sale was from the wrong lot.

Bruce2024

Tom & NotACPA,

Thank you for taking the time to read and reply to my question. I do have an advisor who sells through my Schwab account, so he tells Schwab which lots to sell, so it's not always FIFO. But I think Quicken just assumes FIFO. You can go in and edit sale transactions and specify the lots sold, which I have done to make sure I have the correct quantity of each lot.

So Tom yes, unfortunately, there doesn't seem to be an easy way around my problem. I guess I will have to gradually go through all these transactions to get my accounts matching properly. It is disappointing that Quicken can't do this because the brokerages have the data. Although perhaps they make it difficult for Quicken to access.

~Bruce

Tom Young

@Bruce2024

"It is disappointing that Quicken can't do this because the brokerages have the data."

Quicken does allow for a default costing method over in Preferences but it's limited to LIFO or FIFO:

And, as I said and as far as I know cost basis information generally and specifically lot-by-lot information just isn't downloaded. I don't believe the OFX schema even has fields for lot-level information.

As a separate matter, the lack of lot level information in downloads really should have absolutely nothing to do with Placeholders being introduced into the Transaction List as that only deals with the total number of shares being reported by the financial institution vs. what Quicken calculates as the total number of shares owned of a given security based on transactions in the Transaction List. With enough work you can correct the lots associated with each sale if that's important to you but in and of itself unless one or more sales somehow have zn incorrect number of shares sold that won't fix the Placeholder issue.

Boatnmaniac

I am curious as to why you have so many placeholders. Quicken uses a very simple calculation of total shares held in Quicken vs total shares reported by the brokerage…individual lots have nothing to do with placeholders. Something has caused your holdings (shares held) in Quicken to be different from the number of shares that the brokerage has downloaded. There can be a number of reasons for the discrepancies. Perhaps the most common ones include:

1. When an account is first set up for download in Quicken, the brokerage will download information for a specific period of time. For Fidelity, the initial download was for the last 2 years but I think thy have now changed that to the last 1 year. I don't know what it is for Schwab but it sounds like it is maybe the last 2 years? The brokerage determines how much time the initial download will cover. If you had securities holdings earlier than that time window, they will be downloaded simply as Shares held with no cost nor lot information for them. Quicken will then see this and see the difference between the total number of shares reported by the brokerage and the total number of the shares that are captured in actual transactions. That will generate the suggestion to add placeholders or will automatically generate them if you have your Preference set to do that. To resolve these placeholders you will need to either manually enter every lot that is missing. Or you can do what many do which is to manually enter an Add Shares transaction for each security that has a placeholder for the cumulative missing shares quantity, with an average cost and the transaction date being the date of the Opening Balance transaction (the 1st transaction in the register). Then you can delete the placeholders.
2. Another common cause is that the user goes too long between downloads. Once the initial set up download has been completed, the brokerage will usually change the time period they will download in the future. Again, the brokerage determines how far back they will download transactions for. I think the average is about the last 90 days but some will go back further than that while others, like Fidelity, will download only the last 30 days. Conducting downloads less frequently than that will cause there to be transactions that don't download which will cause Quicken to once again either suggest placeholders or to create placeholders to cover the missing transactions share quantities.
3. Once in a while there are download issues encountered either by the brokerage or with Quicken causing transactions to not download properly or at all causing the same placeholder issue.

An alternative to resolving placeholders by manually entering all of the missing transactions is to manually download and import the missing transactions in QFX file format, a process called Web Connect. It is my understanding that Schwab does not support Web Connect but you could double check by logging into your online Schwab account and see if manually downloading in QFX (sometimes referred to as "Quicken" and "Web Connect" formats) is available. If it is, select the date range of the missing transactions that you want to download and import.

To help prevent placeholders and lot assignment issues in the future, you might was to consider is to set a couple of Preferences as follows:

• Edit > Preferences > Downloaded Transactions > make sure the box is unchecked for Automatically add to investment transaction lists.: This will then prompt you to review all downloaded transactions before they are entered into the register.
• Edit > Preferences > Downloaded Transactions > Lot assignment after investment download > Settings > select the Account from the drop-down menu > make sure the box is unchecked for Automatic Assignment instead of prompting on Accept.: If you have more than one account you will need to repeat this step for each one. This will then prompt you to manually match any Sell transactions to the appropriate lot(s) before they get entered into the register.

The really important thing to keep in mind: Placeholders must be resolved. Leaving placeholders unresolved will cause a issues with a number of other reports and tools.

I personally long ago gave up on trying to make all investments data for lots history and cost basis in Quicken match perfectly with what is recorded at the brokerage because even with massive time commitments being made I could never make it perfect. At best, Quicken's capabilities with investments tracking/planning/reporting will get us to, IMO, a reasonable ballpark performance and tax picture but will almost never be spot on accurate.

For me, this is acceptable because most of my investment accounts are IRAs and Roth IRAs where lot tracking and cap gain/loss from Buy and Sell transactions has no importance from a tax impact perspective. All that really matters for these types of accounts is number of shares held, current price, total value and approximate performance. Many people agree about this and set up their registers for Simple Tracking instead of Complete Tracking then there will be no placeholders and individual transactions to be concerned with.

Also, since most of my accounts are now professionally actively managed (like yours are), I don't even bother trying to track individual security performance because I have no control over which securities are bought and sold and what the exact asset allocations are. The manager makes those decisions for me and I simply provide broad direction regarding asset allocations based upon my investment goals and risk tolerance. Instead I use Quicken to track asset allocation and top-level accounts and portfolio performances. For me, in the overall, the asset allocations and performance information calculated by Quicken is usually +/-0.5% of what the brokerage reports and that is close enough for me.

Bruce2024

Boatnmaniac,

Thank you for this very thorough and thoughtful reply. The reason for so many discrepancies is the first one you outlined. When I set up the account in Quicken initially back in 2022, there were many securities that I had purchased more than two years earlier. When I started to notice my balances weren't matching I looked into the cause and discovered all the placeholders.

I will check to see if I can download from Schwab in the QFX format. If that isn't available, then your point is well noted. If I can get Quicken to be within +/-0.5% of actual performance, then I would be satisfied. Your information on updating the settings preferences is helpful for all future downloads. In terms of resolving the current placeholders, do you think it best to just enter an average cost instead of manually entering every missing lot and adjusting the Sale transactions so the correct lots were sold?

Thanks,

Bruce

Boatnmaniac

@Bruce2024 -

If I can get Quicken to be within +/-0.5% of actual performance, then I would be satisfied.

This has been my experience over the last few years. Hopefully you will see similar results. I should mention that it did take about a year before it got down to such a small difference. Before then the difference was larger but I seem to recall it still +/-1%. I think what narrowed the difference for me was that I'd placed most of my accounts under professional management a few years ago and they pretty much liquidated most of my securities and replaced them with the ones they wanted. So, it was like starting a clean slate with them. Now they place trade orders frequently enough that even though the Sell transactions are not be accurately tied to the lots in Quicken, there really isn't a whole of of performance difference over the course of a year.

In terms of resolving the current placeholders, do you think it best to just enter an average cost instead of manually entering every missing lot and adjusting the Sale transactions so the correct lots were sold?

It sounds like you are planning to continue trying to assign Sells to specific lots. I think you will find that will be rather time consuming but it will provide the most accurate performance and tax reports/Tax Planner results (assuming your accounts are taxable). If that is really important to you, then you should probably consider getting the missing lots entered with actual costs and not do Add Account with an average cost.

When I used to manage my own accounts, I was pretty diligent about making sure the correct sold lots were properly assigned in Quicken to the Sell transactions. It was made a lot easier for me because I made sure Fidelity knew they were to sell shares on a FIFO basis and I also had Quicken set up the same way. So everything correlated pretty well and it wasn't too time consuming to manage.

But now that my accounts are professionally managed and they do not follow FIFO nor LIFO, I found that it is not practical (much too time consuming) for me to continue trying to make sure accurate lot assignments were being done in Quicken. And since my accounts are mostly IRAs and Roth IRAs I just don't see much value from a tax perspective in lot tracking like that anymore. I still keep my Quicken Preference set to FIFO and just let Quicken automatically match for me. No, it is not accurate but it does allow me to have a bit of a life outside of Quicken. 😏 So, for me, if I were to need to address a lot of placeholders now I would probably just enter Add Shares transactions with average costs.

I can't tell you what you should do because only you can define what is really important to you and what you want to get out of Quicken. Hopefully I've given you enough food for thought so you can make the best decision for your needs and wants.

Bruce2024

BoatnManiac,

Yes, you've definitely given me enough here to help me decide which approach to take. Thanks again for all your insight!