Amortised/Early surrender Fee Instruments

Initial fees on an investment transaction can be amortised and depreciated over a period.

When amortisation of initial fees has been selected for a transaction, the amount of the initial fees will be allocated to the Amortised/Early surrender Fee Instrument when the investment instruction is confirmed.

The value in the Amortised/Early surrender fee instrument depreciates from the transaction date*, plus one, over the period (days) as set. The value decreases linearly over every day in the period.

For example:

Transaction Date: 30/8/2017
Period: 60 days
Amortised Initial fee amount: $4000

Daily depreciation = $4000 / 60 = 66.67

value on 29/08/2017 = $0
value on 30/08/2017 = $4000
value on 31/08/2017 = $4000 – 66.67 = 3933.33
value on 01/09/2017 = $3933.33 – 66.67 = 3866.66
value on 28/10/2017 = $66.47
value on 29/10/2017 = $0

NOTE: *  On a fixed term contract the ‘Amortisation start date’ will default to the transaction date of the last investment that pays into the early surrender instrument account to complete the initial fees taken upfront. The value in the Amortised/Early surrender fee instrument will depreciates from this date, plus one, over the remainder of the period (days) as set.

Impact on Current Holdings

When fees have been amortised, there will be a Holdings (Unadjusted View) card and a Current Holdings card. The Holdings (Unadjusted View) will include the amortised fee value. Whereas Current Holdings does not include the amortised fee. The view of these cards is controlled on a user level by using Global Permissions. Under Global Permissions it’s called View Holdings (Unadjusted) and View Current Holdings Card which will control which one you can see and which one not.

There is also a checkbox on Product -> Display Adjusted Holdings. The product and user permissions will only work once fee amortisation has been setup on a contract.

Note:  When a full withdrawal is processed and there are still an amortised amount in the Early Surrender instrument account, this amount will then move to a Cash custody account in order for fees to be taken.  (Withdrawal will be paid excluding the Early Surrender instrument account amount).  The amortisation may be cancelled prior to processing the full withdrawal, see link

Also see amortisation on fixed term contracts

Last Updated on 2 months ago by Debra Hart