Recording advisory fees

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abqmichaelj

18 Jul, 2017 03:03 PM

What is the proper way to record advisory fees in investment accounts? I have investment accounts with several different funds that financial advisors manage (as a portfolio) for me. I keep a cash balance on the accounts and the advisors pull their quarterly fee from that cash balance. The transaction details behind the fee show that this is a debit against the account.

Unfortunately, Moneydance doesn't seem to have an exact "action" type to match with this. Moneydance defaults by showing this as a XFER and tries to assign it as a transfer from one of my other accounts. It doesn't let me just transfer it out (show the expense against) of the cash balance in this investment account. It makes sense to treat this as a miscellaneous expense. However, Moneydance will only assign the MiscExp against particular securities and not against the cash balance. Because I can only choose one security, any choice I make makes that securities look like bad performers relative to the others. (As a caveat, it would be worse if I could assign the cost against them all as each account has a long list of securities.)

What is the "right" way to handle these expenses?

  1. 1 Posted by dwg on 18 Jul, 2017 10:17 PM

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    Don't worry about having an exact action type, what you look for is an action type that records the transaction properly.

    Xfr I believe should work here, in the transfer field, from the drop down list, you should be able to scroll and select the right category, you can use the Description/Memo fields to describe that charge

  2. 2 Posted by abqmichaelj on 20 Jul, 2017 10:09 PM

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    Hi DWG;

    Could you please clarify.

    Are you suggesting that I choose xfer and then an income or expense category for the “account?”

    If so, I have two relevant categories. One is investment expenses and the other is investment income. Would you xfer to/from one of these? If so, which?

    Thanks.

    Michael

  3. 3 Posted by dwg on 20 Jul, 2017 10:22 PM

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    I assume your advisor is withdrawing funds from your investment account to cover his fees. An Xfer from the investment account choosing an expense category where you post his fees would reduce the balance of the investment by the fee amount and also show up in Income & Expense reporting under the relevant category

  4. 4 Posted by abqmichaelj on 24 Jul, 2017 05:06 PM

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    Hi DWG;

    That’s an interesting idea. I think I got what you mean. I choose xfer and “transferred” the money to “investment expenses.” This does show up on my Income and Expenses report.

    I totally don’t understand why there is an appropriate exchange type for money coming into the account (misc inc), but that I use xfer to show expenses against the account. I also totally don’t understand why the income money shows up as income on my investment performance report but that the money I “xfer-ed” out this way doesn’t show up as a cost on the account. This sort of skews the performance analysis by making it look like the portfolio is making more money than it actually does.

    Is it possible that xfer to an expense category is an inappropriate way to record these investment expenses that are tied to accounts?

    Thanks

    Michael

  5. 5 Posted by dwg on 24 Jul, 2017 09:43 PM

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    There is a MissExp action type that you could also use, you use that in the same way

    The action types you have in Moneydance are:

    Buy - Purchase shares of a security from funds in the account.
    BuyXfr - Purchase shares of a security using funds from another account.
    Sell - Sell shares of a security and deposit funds into the account.
    SellXfr - Sell shares of a security, placing the funds into another account.
    Div - Dividends earned for a specific security and deposit funds into the account.
    DivReinvest - Dividends earned for a specific security and used to purchase more shares of that security.
    DivXfr - Dividends earned for a specific security and transferred to another account.
    Short - Sell shares of a security that you do not own, in the hope that those shares will go down in value and can be purchased for less.
    Cover - Purchase shares that were previously shorted.
    MiscInc - Miscellaneous income associated with a specific security.
    MiscExp - Miscellaneous expense associated with a specific security.
    Xfr - Transfer funds to or from this investment account, including income or expenses not associated with a specific security.

  6. 6 Posted by abqmichaelj on 25 Jul, 2017 02:50 PM

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    Yes,

    I was trying to use MiscExp, except the MiscExp has to be assigned against an individual stock/fund and not the portfolio. This made whatever fund I assigned it against look like a dog in the investment performance reporting.

    Michael

  7. 7 Posted by dwg on 25 Jul, 2017 10:01 PM

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    I'm afraid that MiscInc and MiscExp both work on a security basis.

    The only other approach I can think of is to set up a security for the Cash Account Balance of the portfolio, This would always be worked on a price of $1 per unit whenever you put money into or pull it out of the cash account (Buy/Sell). you could then charge the fees against this Cash Security.

  8. 8 Posted by abqmichaelj on 25 Jul, 2017 10:15 PM

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    Or maybe the developers will come up with a better (more intended) solution… Like allowing MiscExpense to post against the account.

    Michael

  9. 9 Posted by dwg on 25 Jul, 2017 10:23 PM

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    The Investment account today is akin to a brokerage account rather than being like a master fund/investment fund/unit trust/mutual fund type account. As a brokerage account fees are charged on a per transactions basis i.e. a buy or a sell so that is how it is geared to work.

    There is nothing in Moneydance to gear Investment accounts to the different way investment funds may work.

    Investment accounts are in my view the weakest part of Moneydance.

  10. 10 Posted by davet65 on 21 Aug, 2017 12:50 PM

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    I don't know why this really works, and it has been a long time since it was set up, but here is what I do.

    I use MiscExp as the Action, charge it to an InvestMgmtFee Category I set up, put the $$ in as a Fee for that transaction, and assign it to a Cash Reserves security account. I don't recall how I set up the Cash Reserves account; I download transactions, and I think it just came through, and I accepted it. It does some strange things in the share price that I can't explain where the info came from, but as far as I can see, it deducts the funds from the cash balance and doesn't affect the performance of any of the other securities in that account. And occasionally I have to put in an adjustment transaction to make the cash balance correct, but overall this appears to work.

    This appears to be similar/same as suggested by dwg. I also agree that handling investments in MD is really poor. I left Quicken Mac for MD a decade ago, and am NOT sorry I did, but Quicken in 2005 handled investments much better than MD does today. I STILL don't trust MD's performance calculations.

  11. System closed this discussion on 20 Nov, 2017 01:00 PM.

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