How to Select a New Transfer Agent

A transfer agent’s work is often done behind the scenes. But that doesn’t mean the work isn’t important: Transfer agents play critical roles for funds, from recordkeeping to calculating shareholder dividends. As a result, it is wise to be deliberate when selecting a transfer agent—whether you’re dissatisfied with your previous provider or are launching or converting a fund. Here’s what to look for:

Systems. A transfer agent’s technology system is the backbone of its operation. A highly automated system offers several benefits. Perhaps most important, a fully automated system that pulls data directly from databases and other sources is likely to be more accurate than a system that relies on individuals to manually enter data.

An automated system also gives you more control. For example, reports can be set to run automatically on a schedule you dictate, rather than on a client representative’s schedule. To gauge the transfer agent’s level of automation, ask about the firm’s workflow and how it sends data to clients. The more automated, the better.

Custom data. To run their businesses effectively, fund advisers need access to specific types of data. They may want to evaluate the number of accounts over a certain dollar amount, or the percentage of accounts that have purchased shares through a particular intermediary. As you evaluate a transfer agent, ask how customizable the data is. Seek out transfer agents that acknowledge that the data belongs to the fund, and that are willing to package the data in whatever form you need.

The people. Employee turnover can be a problem at some transfer agents. Firms that cycle through call center and account processing representatives may deliver clients and shareholders with subpar customer service, so ask a transfer agent for its average tenures in those areas. Also ask how the firm monitors workflow for these employees. A transfer agent that prioritizes call content over call volume is likely to provide better service than one that directs call center representatives to maximize the number of calls they answer in a day.

Consider asking how much interaction you can have with call center and account processing representatives. You may want to sit down with reps periodically to hear what shareholders are telling them, and to help tailor responses to common questions.

The relationship between a fund adviser and its transfer agent should be a reciprocal one. After all, a growing fund benefits both the adviser and the client. Keeping this in mind as you search for a transfer agent partner for your fund will help you make an informed and appropriate choice.

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