Transforming transfer agency in a time of disruption

Much has been said about the potential demise of transfer agency with many custody banks exiting the business. In this time of technological disruption, Global Custodian asks Mike Melles, senior director, and Jeff Young, enterprise strategist of transfer agency solutions at FIS, what providers can do to transform their transfer agency offering and meet new asset manager demands. 
By Joe Parsons

Sponsored by FIS

Are asset managers currently satisfied with the level of transfer agency services from custodians and fund administrators?

Over the past several years, many custodians have exited the transfer agency business, adding to consolidation that has occurred in the industry. This has resulted in disruption as the nature and quality of transfer agency services has changed due to different service models and approaches by those firms acquiring the businesses. Based on what we are seeing, asset managers are not necessarily satisfied with their level of service.

Is transfer agency still a core function? Are there alternatives to traditional providers?

Transfer agency is still a core function for certain providers, including FIS. With many traditional custodial providers exiting the business, this has given way to the rise of a new breed of non-custodial providers. We believe the transfer agency function has morphed over time, and providers must focus more on providing quality data in real-time, while being flexible enough to design a service and operating model that meets the needs of each asset manager and their distribution strategies.

Are there still concerns around the disintermediation of transfer agency services?

If  by disintermediation you mean the changing landscape of providers and consolidations, we believe there are concerns. Fewer players and consolidation into larger players always tends to reduce the choices available to asset managers. While there are still enough providers of various sizes available, recent global events will likely force another round of consolidation within the industry. That will lead to fewer choices, a desire by providers to standardise delivery models to achieve promised synergies, and potential upward price pressure. We don’t foresee much of a change in the current model where most fund distribution is intermediary-driven, however asset managers are focused on the costs of the channels they utilise. With this, they are evaluating opportunities to maintain or expand their direct business while applying technology to reduce their costs for servicing these investors.  

How are transfer agency services adapting to the changing complexities facing fund managers?

As the industry moves to more omnibus trading arrangements, passive investing strategies, ESG considerations and pricing pressures, transfer agents must be ready with flexible service models, more efficient processes, exceptional data strategies and comprehensive and robust cyber-security, risk and compliance support. As asset managers look to improve their own digital footprint and shareholder experience, data provisioning tools such as extensive API libraries, service portals and data management strategies will be the differentiators. No one wants yesterday’s data; they want today’s data in real-time and in a manner easily consumed. They also want to know that data is protected.

How can providers utilise technology to improve the transfer agency function?

Technology will be one of the key differentiators as transfer agents evolve from the call centre-centric operations of the past to the efficient and flexible providers of today and tomorrow. Legacy batch systems will simply not be able to keep up with rapid industry change, whether driven by asset manager strategies, regulatory changes, new investment products or the way investors make their investments. Artificial intelligence can add to functions such as reconciliation and quality controls. Blockchain may be the centralised clearing and settlement of the future.  And data strategies to support the growing appetite for real-time information will be paramount.

To find out more about FIS’ Transfer Agency offerings click here.