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Envisioning a Better Future for the Transfer Agent

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While seemingly every industry on the face of the earth has been subject to rapid change, disruptive technologies and the move to the digital realm, the mutual fund transfer agency space has seen a more gradual change. As some industries and professions have changed in rapid and unprecedented ways, the transfer agent’s single largest transformative force might be the move away from direct accounts and the switch from network to omnibus intermediary trading. These industry changes have lessened the need to focus on large call centers and have increased the need for the transfer agent to be a true back-office function and data source, serving the fund sponsor and its clients.

However, as we look toward the horizon, there are significant changes emerging that will drive the transfer agency model of the future. Many of these drivers will be industry-level, and transfer agencies will need to evolve to a state where they may be unrecognizable 10 years from now. So, what will drive that change?

There will be several primary drivers of change for transfer agents:
• Fee pressure on funds and advisers may increase as passive funds and lower fees continue to dominate distribution and sales.
• Consolidation in the market that we have seen among asset managers and intermediaries may create near oligopolies, driving up platform fees and driving out smaller firms.
• Real-time data will be the cornerstone in order to support the continued requirements of a future that likely evolves to instantaneous settlement of trades.
• Technology and fee pressures may make direct investors attractive again as the cost to service those investors could come down dramatically relative to the cost of platforms. Plus, those investors will expect an experience that mirrors their online and personalized retail experiences, compelling asset managers, product distributors and their providers to provide a seamless “app” experience.

What can we expect of our future?
Simply put, the “app” environment will become central to the sponsor across their product lines and their ability to create a better experience for their clients. The ability to more easily aggregate positions across products and providers with instant updates and on-demand service through multiple channels will drive innovation. Fraud prediction, detection and prevention will need to occur at multiple points in the transaction lifecycle, aided by sophisticated AI technologies like we see in the banking and payments arena.

Digital will reign and paper will become a relic of the past. The investor and intermediary servicing experience will reside in a single, integrated environment, allowing each to design their own dashboards, widgets, statements, performance reporting and more within a robust digital visualization portal. Indeed, the technologies at play may even render the notion of the industry clearing and settlement structure obsolete, replaced by blockchain to create single ledger(s) of ownership.

This future is not so far off for transfer agents.
These changes are already happening within the industry, being led by forward- thinking firms and business and technology partners that believe in a better approach to transfer agency servicing. During this evolution, the winners will be the firms that embrace these new technologies and deploy them across a range of products and services. There is little doubt the industry must emerge from its days of batch processing, mounds of paper and slow innovation timelines. And it will take a visionary, experienced fintech leader to help them realize this future state.

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