How to Evaluate a Transfer Agent

A few of the important factors to consider in choosing a transfer agent partner for your alternative investment fund.


How to Evaluate a Transfer Agent

What to look for and questions to ask about systems and services when considering a transfer agent partner.

You’ve decided to use the services of a transfer agent. You’ve taken a huge step in establishing the foundation for a scalable and efficient investment fund. But it’s crucial to pick the right transfer agent. In Part 1 of the buyer’s guide, we evaluated the transfer agent firm’s experience, depth of service offering, and flexibility of services. Here are some additional characteristics to think about while evaluating a transfer agent along with questions to ask about their capabilities.

Transfer Agent Technology – The Firm’s Transfer Agent System and Knowledge of Current Technologies

Your transfer agent’s systems should increase back-office productivity and provide reporting that makes your life easier. Transfer agent solutions should be high-quality and adaptable in order to meet your business objectives. You want your transfer agent partner to be able and willing to provide unique programming, enhancements or bespoke system features if your fund requires them. Your back-office workflow will revolve around the firm’s transfer agent system. An innovative transfer agent system integrates all key industry actors and their technologies and centralizes data, documents and functions.

Questions to ask a transfer agent about their technology:

  • Is it possible for your transfer agent system to be adapted to my asset type and business requirements?
  • Is your transfer agent system capable of receiving files from other systems or service providers?
  • Do you have digital connections to wire houses, broker-dealers, RIAs, the AIP platform, DST FAN Mail, custodians and family offices through your transfer agent system?
  • What kind of sales and transaction reporting can I get from your transfer agent system to help my sales teams?
  • Can you adjust financial reporting for GAAP accounting, auditors, transaction teams and fund management in your systems?
  • Are your systems capable of producing ILPA-compliant reporting for my institutional investors?

The importance of a transfer agent’s technology:

  • Advanced transfer agent systems and other technologies save money by cutting down on execution times and decreasing errors.
  • You can better manage your fund with custom reporting based on data from your transfer agent.
  • Sales and transaction reporting in the transfer agent system boosts your capacity to find additional investment capital.
  • In a transfer agent system, data links to industry entities enable transaction execution that is easier and faster.
  • The efficiency of your transfer agent system enhances your brand’s reputation among advisers and investors.
  • The controls, approval stages and audit trails in an advanced transfer agent system improve overall accuracy and streamline audits.

Customer Service as a Top Priority for the Transfer Agent

How your transfer agent partner works with you, the client, is critical. You should not be forced to leave voicemails or speak with different departments when you call your transfer agent partner. There should be no need for you to wait in phone queues. Your transfer agent partner’s treatment of your investors is essential to your reputation and, therefore, follow-on investments. Your transfer agent should put you first in terms of both serving and representing you.

Questions to ask a transfer agent about their commitment to customer service:

  • How will my transfer agent team be consituted and when will they be available?
  • Who will I be interacting with on a daily basis? Is there a plan in place for backup personnel?
  • How much experience do your transfer agent teams have?
  • What is your employee turnover rate?
  • Will the individual I speak with be familiar with my fund and its operations?
  • When my investors and their advisors contact my transfer agent, how will they be treated?
  • Is any of your customer service personnel contracted out?
  • What criteria do you employ to evaluate your transfer agent teams’ customer service?

The importance of a transfer agent’s customer service:

  • The transfer agent’s job is to save you time and keep you from being distracted by back-office concerns, not to make it difficult working with them.
  • Your transfer agent account team should be as much like your own employees as feasible, responsive, knowledgeable and familiar with your requirements.
  • The treatment of your investors and their financial advisers by your transfer agent partner is the public face of your brand and leaves an impression.

Transfer Agent Services with Transparent and Reasonable Pricing

Although the cost of transfer agent services should not be the most important factor in your decision, it should be taken into account. When a transfer agent firm makes a proposal for services, very low prices could be a sign of outsourcing, poor service quality or a small, under-equipped transfer agent trying to break into the industry. Expensive prices may reflect the brand recognition of a well-known transfer agent rather than represent real value to you. Value pricing in transfer agent services shows a clear relationship between charges and the real time and effort required by the transfer agent to properly fulfill administrative operations.

Questions to ask a transfer agent about their fees:

  • What is your fee structure for transfer agent services?
  • Is your price determined by a percentage of assets under management (AUM), the number of investors, time and effort taken or something else?
  • Do you have separate pricing for different transfer agent services, or do you have a flat rate for everything?
  • How does the pricing of your transfer agent services change as my fund increases in size or more funds are added?
  • Is your pricing model straightforward and easy to understand?

Pricing is critical if you want your transfer agent fees to be money well spent on behalf of your investors.

The importance of a transfer agent’s pricing model:

  • By engaging a low-cost transfer agent, you may well pay for it with bad service and frequent mistakes.
  • Larger transfer agent businesses may not provide the same quality of service to their smaller transfer agent clients as they do to their larger transfer agent clients. What you pay for is not always what you get.
  • There should be more to your relationship with your transfer agent partner than just money.
  • Compared to hiring an in-house transfer agent team, pricing for outsourced transfer agent services should offer a significant savings while providing professionalized service to investors.

A Close Back-Office Collaboration

You would hire responsive, competent and technically knowledgeable people if you were building an in-house transfer agent team. The answers to these question will help you assess whether a transfer agent provider is qualified, equipped and motivated to be the transfer agent partner for you, the team you would choose yourself. Outsourcing transfer agent functions is a smart business decision and a good way to divide labor efficiently, but only if both parties are capable and on the same page. The answers to the above questions should give you a decent indication of whether or not a transfer agent company would be a good operating partner for you.

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