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Transfer Agents Becoming More Proactive Consultants


In the wake of recent regulatory challenges in the mutual fund industry, the very relationship between fund companies and their transfer agents has begun to change. Transfer agents today have expanded their role to reflect the growing need in the industry for thought leadership and consultative servicing. While technology and shareholder servicing remain at the cornerstone of the transfer agency offering, fund companies should expect this added value from their transfer agents to complement their focus on regulatory requirements and changing markets.

As financial-services professionals caught in a quarterly paradigm of analyst assessments and product development schedules, we as an industry often find it difficult to look much further than three to six months down the road. In these uncertain times, however, management companies need to focus even more on strategies to gain a competitive edge in the market. They should rely on their transfer agents to provide regulatory consulting and technology tools, and to work collaboratively with them to anticipate the challenges of tomorrow.

Transfer Agents: Tap into the Knowledge Asset'

The core offerings of technology and shareholder servicing fall into a broader paradigm that we at DST Systems and Boston Financial Data Systems refer to as the transfer agency "knowledge asset." The knowledge asset is comprised of the technology, resources and workers - and the complex interrelationship between the three - that drive the success of transfer agents and their clients in a fast-changing environment.

For example, technology innovations that enable mutual fund companies to streamline operations, improve quality and facilitate self-servicing are available because of the valuable market intelligence and foresight of those who develop it. That intelligence and foresight is gleaned enterprise-wide as transfer agents tap into resources such as the fund boards with whom they interact, client forums and user groups that they facilitate, and their involvement and leadership with regulatory and legislative affairs.

Scale is an important element of the technology asset as well; state-of-the-art equipment, specialization and infrastructure are possible only when transfer agents can leverage their size and their relationships with partner providers.

Arguably, the most important component of the knowledge asset is the experience and expertise of transfer agents' associates. This cumulative knowledge is built from each individual within a transfer agency, every person those individuals engage with, every network those people build - and the knowledge, predictions, experience and insight they share with each other. Again, scale is critical. Experience with a broad range of customers representing different service models, distribution strategies and organizational cultures provides a vast knowledge repository. As experience is shared throughout a large enterprise, this knowledge is leveraged and best practices are identified that ultimately benefit all clients.

Fund Companies: Know Your Provider

New regulations such as 38a-1 (which addresses chief compliance officer requirements) and 22c-2 (which addresses redemption fees and transparency) make it clear that fund companies can not take a hands-off approach to working with their transfer agents. To be able to attest that fund rules are being followed and to ensure that Securities and Exchange Commission mandates regarding fees and transparency are met, fund companies must be aware of the processing and business decisions that happen at their transfer agents.

In our experience, mutual fund clients today know and value their transfer agents more than ever before - and that reliance is continuing to grow. As intermediaries provide more data for funds to monitor, and as third-party compliance attestations and audits supplement CCO intelligence, fund companies are exposed to more of the inner workings of transfer agency operations.

Many of our clients visit and communicate with us regularly as part of their due diligence and assessment processes. This represents a major shift in the relationship structure: Clients that used to simply turn over mutual fund operations are now working with us to provide more detailed information and leverage our expertise and advice.

To support our clients' need for information, DST and Boston Financial have developed resource guides that CCOs and boards of directors can use to expand their own knowledge of transfer agency operations. Fund companies have a great resource in their transfer agents, which can provide a broad perspective, based on their ever-developing knowledge asset, in critical areas such as technology innovation and regulatory compliance.

In this dynamic environment, we must set our gaze on both the short term and the long term. As we work to meet quarterly objectives, we also must transform our strategies to ensure that our organizations have the agility and capacity to anticipate new issues and new developments.

Ultimately, the knowledge asset is a strength shared between transfer agents and their clients. When it is continuously nurtured and applied to new and challenging opportunities, it enables transfer agents to provide value beyond the traditional scope of their responsibilities, and embrace their new role as technology, regulatory and business solutions consultants.

When mutual funds and their transfer agents work together to share strategies and knowledge, they are better able to understand the current environment and their options, and to face the challenges that the future presents together.

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