What to think about when analysing trading statements

It is important for investors to regularly review their trade or account statements. Not only do these documents help to stay on top of all investment decisions, they could also point towards trade errors and any evident mismanagement of funds or misconduct by brokerage firms. Brokerage firms are required to provide these statements for active accounts on a quarterly basis, although there are some who even offer monthly statements. The account statements also include trade confirmations during or before the transactions are completed.

The accuracy of these statements and confirmations are seriously looked into by financial regulatory bodies. So, remember to always contact your broker if you notice any discrepancies.

What Do Account Statements Cover?

Important information like your account number, your contact details, along with that of your financial services and clearing firm and the summary of all your investments should be present in the account statement. Some statements also include the recent market value of your holdings. For illiquid instruments like REITs, an estimated value is included. These documents can either be mailed to you or sent to your e-mail address.

Many brokerages have dedicated activity and trade report sections on their website, for which you can register and set notification preferences to get customised reports. Mostly, these documents are only sent when there is trading activity. Come of the common information included in such statements are:

1.      Statement Time-Period and Date Range

The period of investment will determine the results at the end of the account statement, so keep tabs on this. You should notify your broker if there is no specific end date or time period mentioned. These periods also have to be consistent for each report.

2.      Account Number and Personal Details

What is your account type? Is it a personal, joint or UGMA account? If there is a change in the account ownership status, notify your broker immediately. You should also update changes in address or e-mail information. Raise a red flag if the account number doesn’t match the previous statement records or if your email account has been hacked.

The statement will include the name of and contact information for your financial and clearing firm too. Account statements from brokerages often do not include specific names of financial professionals, but there should be a phone number at least. Raise concerns if the provided phone number always stays busy or is unavailable.

3.      Account Summary

This is a detailed picture of your account performance, which starts from the end-date of your previous statement. It is very important to carefully review your account position, including your buy, hold and sell commands. Notice if the results are abnormal. For instance, positive returns all the time is unrealistic. Notify the broker if you see any unauthorised activity.

4.      Income Details

This section could be either come as a separate section or consolidated with the summary. Look out for deposits, withdrawals, dividend payments, interest on dividends and bond maturity dates. Again, check for unauthorised transactions and unfamiliar sources of interest income.

All the fees charged to your account will also be mentioned here. Brokers are required to provide transparent disclosures on every charge and commission. See if the handling costs, commission charges or other costs are higher than expected.

5.      Account Activity

This starts with the opening balance and ends with the closing balance, while in-between lies the record of every trade transaction that you have done in the mentioned time-period. Here, you should compare the trade transactions with trade confirmations in the statement. Discretionary account holders, who have finance professionals executing trades on their behalf, should especially take note.

6.      Margin Details

There will be times when you take a loan from the broker to increase your position size. Remember that such loans come with their own set of risks. Your statement will let you know the details, including the interest charges on the margin amount for the specific time-period. Notify the broker if any margin has been included on trades without authorisation. Also check whether the cost of margin exceeds the disclosed interest rate.

7.      Details of Portfolio

Check the accuracy and details of the individual assets you hold. Ask for information like bond yields, insurance ratings, unrealised losses and gains, to help you ascertain whether you are achieving your financial goals. This is also a good way to see if your portfolio is diversified enough to manage risks. Check if there is an asset mix that is not in accordance with your risk profile. See if they have missed out on reporting any asset. Review the gains and losses of your portfolio, including whether they reflect investment opportunities. See if the net value has increased or decreased from the previous records. Identify the assets that are making losses, and make a trading plan accordingly.

8.      Disclosures and Glossary

A good statement will contain information about terms and codes, so that your stay alert and protected. This section will also contain explanations of the fee structure, which is the ideal place to spot any changes in legal information and jurisdictions. Identify if there are fee disclosures that are different from what you are being charged.

What Should You Check in Trade Confirmations?

Trade confirmation reports tell you about the time and date of trade executions, currency prices or stock prices at which they were executed and the lot sizes. It is also where you can see if your broker acted as a principal for its own account or as an agent for you. There are separate accounting norms for both cases. Contact the firm for any trade that wasn’t authorised and accept only written responses. See if any trade was actually your broker’s idea, but listed in the statement as unsolicited.

Consolidated account statements are becoming regular nowadays but remember that they can’t replace the detailed brokerage account statement. If you receive both, read and compare both of them and look for any discrepancies. The prices reflected in the account statements are usually accurate, although firms do not guarantee that. Be wary of accepting statements that do not look professional or appear altered in any way.

Disclaimer

If you liked this educational article please consult our Risk Disclosure Notice before starting to trade. Trading leveraged products involves a high level of risk.  You may lose more than invested capital.