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Why Do Firms Use Sleeves to Manage Accounts More Effectively?

What are Sleeve Accounts?

Items to Consider Before Sleeving

Onboarding Setup Considerations for Sleeves

Trading Outside of Orion

Negative Cash Balances

Custodial Account Balances

Contribution and Distribution Sleeve Balances

Account Pays For Considerations

Rejecting Pending Trades

Sleeve Transfer Tool Training

General FAQs

Associated Areas & Best Practices

Billing
Cost Basis
Performance
Reporting
Trading

How to Sleeve a Custodial Account
How to Reconsolidate a Custodial Account

 

Why Do Firms Use Sleeves to Manage Accounts More Effectively?

• Sleeves are a great way to assign multiple models to the same account.

• Allow you to report, calculate performance, or bill differently on each individual sleeve within the account.

• Sleeves are a solution for firms with separate reps responsible for different value blocks within the same account. This allows each sleeve to rebalance based on its current value, rather than always rebalancing all sleeves or strategies to their "target" per cent of the account. 

BEST PRACTICE: It’s important to note that all sleeves require similar amounts of setup and maintenance. Sleeves are primarily created for trading and should not be created unless specifically for trading purposes. Failure to follow sleeve best practices may result in overspends, oversold positions, and other potential discrepancies. Sleeves are also an additional cost to your firm, and you must sign an addendum before starting the sleeving process.

What are Sleeve Accounts?

• A sleeve (UMAs or Unified Managed Accounts) is a sub-account of the main custodial account and is treated as a normal account in Orion. Creating sleeve accounts is a multi-step process that involves specific scenarios and affects several platform components.

• This process includes taking one custodial account and breaking it into multiple accounts within Orion. Different assets are transferred into each sleeve and do not have to be assigned to the same management style or model. Each sleeve has its own separate account ID within a household, and all are in the same registration.

For a list of custodians that support sleeved accounts, view our Custodians That Support Sleeve Accounts (UMAs or Unified Managed Accounts) Support article.

Items to Consider Before Sleeving

• When cash is available, it is distributed amongst the sleeves according to the contribution method selected during the sleeve setup process.

  • All model assets transfer to the appropriate sleeve; non‐model assets included in global substitution groups transfer as well. Review How Assets Move During the Original Sleeve (UMAs or Unified Managed Accounts) Setup for more details
     

• For assets claimed by more than one model in a registration, a registration-level rebalance divides the asset across the sleeves based on the sleeve and asset targets.
   

• Any assets that are excluded, non-model, or not set up as substitutes remain in the custodial account. As a best practice, these assets must be moved into their own sleeves after creating them.

  • When assets need to be sold as part of a registration-level rebalance, they need to be transferred to an active sleeve to be included

Onboarding Setup Considerations for Sleeves

Before creating sleeves, additional setup and operational considerations should be reviewed to prevent downstream reconciliation, billing, and trading issues.

During onboarding, a decision must be made on how cash assets are represented. Firms must determine whether cash should be treated as a single asset or split out by enabling the Custodial Cash checkbox.

As a best practice, do not create sleeves until historical reconciliation is fully complete. Sleeving an account before reconciliation is finalised may result in sleeves being created with incorrect balances or asset data.

Trading Outside of Orion

When trading occurs outside of Orion for Equities, ETFs, or Mutual Funds, your firm is responsible for manually moving transactions into the appropriate sleeve after trades are completed. Review How-To and Overview: Sleeve Transfer Tool for more information.

For Fixed Income, Alternatives, and Options, rules may be configured by product type to route trades to a specific sleeve. This approach is only appropriate when those product types are held in one sleeve per registration.

Negative Cash Balances

Negative cash balances should be actively monitored using the following Sleeve Accounts with Negative Balance Assets audit in Portfolio Audit.

Regular review of this audit helps identify and resolve funding issues before they impact trading, billing, or performance.

Custodial Account Balances

After sleeving, custodial accounts should maintain a $0 balance. Any remaining assets or cash may indicate incomplete transfers.

Regularly review the Sleeved Custodial Accounts with Balance audit in Portfolio Audit to help identify issues.

Contribution and Distribution Sleeve Balances

If a distribution is taken and the distribution sleeve has no value, the system pulls cash based on the defined distribution targets. Firms may bypass the contribution/distribution sleeve if needed.

Benefits of Contribution and Distribution Sleeves include:

• Performance: Modelled sleeves prevent excess cash from diluting performance results

• Billing: When no fee schedule is assigned, these sleeves are excluded from billing, reducing the risk of negative cash balances

• Reporting: Reporting treatment aligns with sleeve-level performance

• Trading: These sleeves function as protected cash buckets

To monitor balances, use Query 12200 – Contribution/Distribution Sleeve Balance Audit.

Account Pays For Considerations

When a custodial account is configured to pay fees for all sleeves, the Create Pending Fees setting must be reviewed.

After fees are collected, firms are responsible for moving cash via the Sleeve Transfer Tool to cover any resulting negative balances in the custodial account. Orion does not recommend utilising a custodial account from a sleeved registration to pay fees for other accounts.

Rejecting Pending Trades

As a daily operational best practice, firms should review pending trades in Eclipse each morning to ensure they are processing correctly and do not impact sleeve balances. Review How to Review, Troubleshoot, and Reject Pending Trades for more information.

Sleeve Transfer Tool Training

To effectively manage sleeves, users should be familiar with the following Sleeve Transfer Tool processes:

• Backdating sleeve transfers

• Transferring assets across multiple accounts or registrations

• Updating quantities in bulk

• Updating models in bulk

• Launching the Sleeve Transfer Tool directly from Portfolio Audit findings

These workflows support efficient maintenance and help prevent common sleeve-related discrepancies. Review How-To and Overview: Sleeve Transfer Tool for more information.

General FAQs

Q: If I change my mind after sleeving an account, can I undo it?

A: No, once an account has been sleeved, you do not have the ability to retroactively undo this process. However, accounts can be un-sleeved. Once done, all assets in each sleeve are transferred, and all performance and transaction history remains in the historical sleeve inside the registration.

Q: Will there be sleeve history when I sleeve out an account?

A: No, the data in a sleeve starts when a sleeve is created. All historical performance and transactional data are held in the custodial account.

Q: If I sleeved accounts in my previous system, will that history come over to Orion sleeved?

A: Orion does not get historical data for sleeved accounts when they transfer over to our system. All historical data from your previous system is posted within the custodial account. If you would like historical data in each sleeve, import stored performance to each sleeve.

Q: Can I hold unmanaged positions in the custodial account?

A: No, after sleeving an account, the custodial account should remain at a $0 balance and not hold any positions. After sleeving, the custodial account is not part of the reconciliation process, so inaccurate balances can go unnoticed. Custodial accounts are also not recognized by the Orion Trading Platform and are not factored into rebalances.

Q: How do I add or change the account number suffix on my sleeved accounts?

A:  The account number suffix is the _01 after the account number for each sleeve. Custom account number suffixes are assigned in the models app to reflect the model the sleeve is assigned, such as _ARG or _GROWTH. To change the account number suffix, update the suffix on the model. Please be aware that changing the suffix on the model automatically updates the suffixes on all sleeved accounts assigned to this model. In addition, reassigning a sleeved account to a new model automatically updates the suffixes to match the newly assigned model.

How to get there:  Models app > Right-click on the desired model > Edit Model > Account Number Suffix field

Q: How do sleeved accounts affect the Client Portal?

A:  Similar to running reports or performance, it is best practice to display performance at the registration level in the client portal.  Alternatively, grouping accounts by management style or model allows you to show and delineate individual sleeves.

Associated Areas, Best Practices, and FAQs

The following sections explain how each Orion team is affected by sleeves and include best practices and additional articles relevant to sleeves. Please read all sections before sleeving your accounts to better understand the types of maintenance required for sleeves across the platform. 


Billing
After an account is sleeved, keeping it is a best practice to keep the custodial account at a $0 balance. This makes it easier to track flows and the movement of money when funds enter and leave the custodial account.

We recommend billing sleeves in arrears, based on the average daily balance. This helps the system capture money movements between the custodial account and the sleeves, reflecting them more accurately as they occur. This makes it easier to reconcile at the end of the billing cycle.

The custodian does not recognise Orion’s sleeved account and only recognises the custodial account. When fees are calculated in the sleeve account, they are rolled up to the custodial account and are listed under the custodial account number on the fee file. 

Important Note: The management fee is applied to the direct-paying account. When the sleeved account does not have enough cash to cover the fee, cash needs to be moved to the corresponding account using the sleeve transfer tool to cover the debit. An alternative solution is to have the Data Reconciliation team run a daily query to review any sleeve registrations with a debit value in cash. The system looks for any open trades across identified accounts (ready or partially executed trade instances) and skips cleanup when there are open trades. If there are no open trades, it accesses the total percentage of each cash-positive sleeve's cash value relative to the overall positive cash in the registration. If there is a net cash debit, the registration is skipped during the clean-up. If not, the negative cash script would take the currently held percentage of positive cash and journal out enough positive cash from the sleeves to cover the debit balance. 

As a best practice, hold a minimum of 1% cash allocation in models to prevent the account from going negative. If you want the system to allocate the management fee impact across the sleeves based on the fees calculated in Orion (this only benefits sleeve-level performance, as registration-level performance is the same regardless), you must enable the Fee Auto Post database entity options. Please contact the Billing team to enable this for your database. Please contact the Recon team if you have any questions regarding where the management fee transactions are allocated. 

Billing FAQs

Q: How do sleeved accounts impact my billing setup?

A:  When an account is sleeved, most of the billing settings assigned to the custodial account are inherited by the sleeves, but some settings need to be added to each individual sleeve.
 

• Fee Schedules and Payout Schedules are all inherited by the sleeves based on the settings on the custodial account. Keep in mind that Orion's best practice is to bill based on average daily balance in arrears because it is difficult to mark cash flow transactions in sleeves when billing in advance.
• Billing Exclusions are also inherited by the sleeves from the custodial account, except for cash assets.  A new "Custodial_Cash" asset is created in each sleeve and does not inherit the existing billing exclusions if one is set.  Add billing exclusions to each sleeve if desired.
• Recurring Adjustments are not inherited by each sleeve.  Add desired recurring adjustments to sleeves and ensure that existing adjustments are removed from both the custodial account and any closed/cancelled sleeves to prevent fees from being charged on a zero-balance account.

Q: Can I set up one account to pay fees for my sleeved accounts?

When setting an account to pay for a sleeved account, it is best practice to set the custodial account to pay for the other custodial account, along with that account's sleeves. If you do not set it up this way, management fee transactions will not be allocated to the correct account, which affects the account's overall performance. Refer to the Setting an Account to Pay for Another section in the Sleeve Billing Overview & Best Practices article for an example and more information.

Q: How does the tiered billing schedule work with sleeved accounts?

A: If a tiered fee schedule has the "Basis" setting set to "Account", the fee schedule looks at the value of each individual sleeve rather than the total value of the accounts. Setting the Basis to the registration or household level avoids overcharging a client with sleeves. Please keep in mind that changing the Basis on these fee schedules impacts all accounts assigned to them, not just your sleeved accounts.

Other Associated Articles:

Sleeve Billing Overview & Best Practices
Sleeve Billing Scenarios & Calculations
Cancelling/Closing Sleeve Accounts - Billing Scenarios

Cost Basis

As a best practice, mark all sleeved accounts as reviewed in the Tax Center  app, and set a filter (Reviewed > Is false) to filter these from view. This removes the sleeved accounts from the audit because cost basis is stored, and should be reviewed on the custodial account.

Performance

The performance of each sleeve is dependent on the assets held within the sleeve account itself, similar to how a normal custodial account is calculated.

Important Note: The sum of the sleeve performance does not equal the overall account performance. For more information on how performance is calculated, please review the TWR Whitepaper article. 

Performance begins for sleeve accounts on the date they were sleeved. Orion does not offer historical sleeving of accounts, which is another reason why reporting at the registration level is optimal in this case as it is the only way to report the history of the account from its inception through the current date once the account has been sleeved. We do not recommend linking sleeves together for reporting to try and navigate around this, as reporting at the registration level accomplishes the same thing.

Performance FAQs

Q: How do I view historical performance after sleeving an account?

A: Since all historical data is housed within the custodial account, run performance on just that account to view historical performance.  If you would like to generate performance reports both prior to and after sleeving, run your performance at the registration level to capture all available data.

Please note: Since it is an Orion best practice to leave the custodial account at a $0 balance, ensure your report settings are set to include $0 accounts.
 

Q: How does sleeving accounts impact composites?

A: After the account is sleeved, each individual sleeve is included in composites as its own entity.  When an account is sleeved, it is excluded from composites that month automatically due to a change in strategy.  If you want to include the account in composites for that month, wait to sleeve the account until the last business day of the month and manually include that account in composites.

Reporting

When reporting on sleeves, it is best practice to group them at the registration level instead of at the account level. Sleeves are shown as individual accounts in Orion and reporting at the registration level effectively shows each registration in the household as if it was an account, and rolls up all the transactions and activity up to the registration level.

Since reporting at the registration level shows each registration as a single account, with the exception of registrations containing sleeves, registrations should only contain a single active account.

Verify if any registrations contain multiple active accounts by running Query 4847 - Registrations With Multiple Accounts. If any non-sleeved registrations are found to contain multiple active accounts, the additional accounts need to be moved to their own registrations.

For more information, please watch the Householding App Overview - Video (3 min.)

Example: Reporting at The Account level

Example: Reporting at the Registration Level

Changing Custom Report Grouping

In the Report Builder, change or set the grouping for any Sub-Reports from: Account to Registration. The following video demonstrates how to change the grouping of a Grouping table so it will list out all the registrations in a household instead of accounts in the household.
 

Important Note: When reporting at the registration level, you are still able to display the account type as the registration and account(s) within have the same account type. You will not see the account number for registrations containing sleeves. This is because sleeves in Orion are assigned their own account numbers, therefore a registration containing sleeves contains more than one account number. 

For help with creating or adapting reports to display sleeves at the registration level, please reach out to the SME Reporting team.

Reporting FAQs

Q: How do I run reports and view performance on an un-sleeved account?

A: Once an account is un-sleeved, reports and performance must be run at the registration level to capture all historical data from the custodial account and each individual sleeve. Doing so combines the account and its sleeves into a single entity for reporting and performance. If you wish to show individual sleeve performance, subgrouping options include model, management style, and account number to delineate each sleeve. It is best practice to ensure the "Household Performance Include" setting is set to All Accounts.   

How to get there:  Firm Profile app > Option Information > Performance Calculator

Other Associated Articles:

How to Search for and run Queries in the Query App
Creating Grouping Tables in Report Builder

Trading

Each sleeve account is managed independently based on its specific targets, or the entire registration gets rebalanced to bring the sleeves back to target, depending on the current need. This includes rebalancing the assets within each sleeve to their model targets. The sleeve transfer tool allows assets to be transferred easily between sleeves. Contribution and distribution sleeves are used to either exclude cash from the sleeves for later use or remove it from the account. 
 

Other Associated Articles:

Contribution and Distribution Sleeves Overview
Custodians We Can Sleeve
How to Create Global Sleeve Strategies and Aggregates
How to Create Custom Sleeve Strategies
How to Import Sleeve Strategies
How to Import Sleeves
How to Use the Sleeve Strategy Aggregate Import
How to Use the Sleeve Transfer Tool
How to Raise and Spend Cash in Sleeved (UMAs or Unified Managed Accounts) Portfolios
How-To Handle Cash in Sleeved Accounts (UMAs)
How to Rebalance Sleeves and Sleeved Portfolios (UMAs or Unified Managed Accounts)
TOM - Sleeve (UMAs or Unified Managed Accounts) Trading Guide

How to Sleeve a Custodial Account

For more information on creating sleeves, please review the How to Sleeve a Custodial Account article. 

 

How to Reconsolidate a Sleeved Custodial Account

For more information on un-sleeving registrations, please review the How to Reconsolidate a Sleeved Custodial Account article. 

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