Transfer Agency: Transformation, Not Extinction

Rumour has it that the function of transfer agency by custodian banks is dead, but Northern Trust's head of global fund services EMEA, Clive Bellows, explains why these rumours are exaggerated.

Rumours of my demise have been greatly exaggerated, Mark Twain once told a journalist, after newspapers incorrectly printed reports that he had succumbed to illness and passed away. Twain was in part bemused, and in part frustrated, by how quickly he had been written off.

Practitioners in the transfer agency (TA) space may feel similar frustrations. Rumours of the demise of TA as a core function of custody banks and fund administration services are often discussed, with concerns that traditional transfer agents are unable to tackle increased complexity, and a requirement for more efficiency.[1]

As with all rumours, there is a rationale.  For TA, it is true that some providers have exited certain core markets, leaving clients of those custodians to develop relationships with non-traditional vendors and a new breed of specialist providers have entered the space. Increased regulation is adding pressure and innovations like Blockchain and distributed ledger technology mean change continues at high speed.

However, traditional TA services should not be written off. Clients want to engage with TA providers on everything from anti-money laundering regulations to distribution strategies. Asset managers and owners still want custodians who provide a core TA product offering. For some, this means re-thinking or replacing legacy systems. Northern Trust, for example, are creating solutions that harness the power of technology, while giving clients control and a superior user experience.

Changing business models

Traditionally, the industry’s key players have been larger global banks who have offered TA as part of a suite of services. Since the global financial crisis business models have had to change. Some providers have sold their TA operations, partly due to increased regulation1 and the requirement for costly compliance measures.

Another factor is complexity. Portfolios are increasingly globalised and straddle many legal jurisdictions. The increased complexity of products, the continuing rise of alternatives, new types of investment vehicles and their different processing requirements are also adding additional challenges.

New entrants who embrace innovation and are specialist TA and FinTech providers, offer streamlined solutions, leading to discussions about the disintermediation of traditional TA offerings. However, by using these firms, institutional investors will need to engage and monitor multiple vendors and systems, rather than utilising a custodian who can operate across all asset servicing functions.


There has never been a better time to get TA right. It is like the engine of a car, you never notice it, until it stops working as it should. Asset managers want to work with custody banks that offer a one-stop-shop for all their needs, as well as state of the art solutions, efficiency, scale and flexible architecture to deal with all asset and investment products. They require real-time data and information and they expect it to run smoothly.

Northern Trust is embracing transformational technology and has begun a four-year programme, providing enhanced client services. For example, our new TA portal – “UX2020” – in partnership with IBM, will validate data up front and allow clients to have near/real-time data visibility. 

Not just the basics

To be successful, TA providers need to offer support around other ancillary services, such as distribution. Institutional and retail investors have been diversifying their portfolios and their appetite for new products has been increasing. The European asset management industry stood at €25 trillion in 2017[2], but while attractive, the market is not easy to break into as it is heavily concentrated. Looking to the future, TA providers will need to offer strategic insight into market nuances for global clients.

Getting ahead

The rumours of TA’s disintermediation and subsequent extinction are exaggerated. Investors want to work with custodians who provide the right solutions. They want to work with  strategic partners, not just implementers. They want to see service providers create efficiencies. It is not enough for custody banks to stick a band-aid on existing services, TA providers need to transform their business models. While some have bowed out, others are wholly committed to the future of TA. In the words of Mark Twain, The Secret of Getting Ahead is Getting Started.

[1] Tony Warren, FIS, “Special Agents Required: Calling a New Generation of Transfer Agency Services”


[2] European Fund and Asset Management Association (EFAMA) “Annual Report 2017”