Can Squeezed Transfer Agency Services Really Deliver “Business as Usual"?

As another global custodian sells off its stake in a transfer agency service, clients have been told to expect “business as usual”. But when takeover plans include shaving tens of millions in annual costs from the acquired business, could there really be no impact on investor servicing?

The latest transfer agency buyout comes at a time when the shareholder servicing function demands investment, not cuts. The sub-accounting model and an onerous regulatory environment have resulted in a rationalization of the function by providers, causing many to withdraw or sell off their transfer agency services. But the complexity and demands of modern investment portfolios make the need for efficient transfer agents more intense than ever.

From a transfer agency perspective, many emerging, alternative investment products have different workflow requirements compared to those of traditional instruments. While batch-based processing is still the prevalent technology, the need for same-day processing and settlement, intraday pricing and 24/7 cash projections has never been greater. The flexibility of transfer agency technology is also key, as the ability to be nimble and quickly address new requirements often is better achieved by more modern technology platforms.

What’s more, with portfolios that increasingly span many territories and jurisdictions, firms must inevitably navigate multiple regulatory requirements and tax laws. So, as they extend their footprint in the search for alpha, and strive to improve returns to attract investors, they must also find new ways to manage the costs, risk and complexity of cross-border shareholder servicing.

With volumes still diminishing and large financial institutions continuing to leave the market, a new generation of transfer agent is required in the form of an industry utility that can support broadening portfolios, niche processing nuances and complex regulatory demands. An independent, neutral player – providing technology and services, not rival financial products – can typically deliver the pricing advantages, scale and efficiencies of a large, global service, without being a direct competitor of their clients.

Above all, transfer agency’s latest champions must recognize that the function deserves the very highest levels of support. Innovation should be an important part of their remit, enabling them to maintain a flexible, open, modern architecture and deliver 24/7 continuous processing and reporting. In addition, they should offer real-time access to account data and a transparent, predictable fee structure. And finally, no cutting corners to reduce costs or service quality – instead taking “business as usual” into a new league altogether.