What to Look For in a Transfer Agent

Having the right transfer agent support allows fund management to focus efforts on raising capital, acquiring assets and delivering maximum value to investors.


What to Look For in a Transfer Agent

Transfer agent services for alternative investment funds: a buyer’s guide

You’ve made a significant step forward by deciding to work with a transfer agent. Outsourcing transfer agent services, fund accounting, investor services, and other back-office activities so you can focus on sales and assets is a wise move, but one that should be taken seriously.

The importance of selecting the correct transfer agent provider cannot be overstated. Here are the most crucial things to look for in a transfer agent company, as well as the questions you should ask about their services.

Having the correct transfer agent support allows fund management to focus efforts on acquiring assets that will bring maximum value to investors.

The Transfer Agent's Background and Experience

Some transfer agent companies have a lot more relevant experience than others. Firms might move into the function of transfer agent from other business sectors. Some companies provide transfer agent services as an add-on to their primary services which may serve other industries. The transfer agent provider you should seek out has a lot of experience with alternative investment funds. It should be their primary focus. The role of a transfer agent for mutual funds and ETFs differs significantly from that of a transfer agent for alternative investments. It’s a mistake to believe that just because a transfer agent’s name is familiar with publicly traded funds that they’re proficient in transfer agent services for private funds. Furthermore, because a transfer agent is a complex team-oriented role, the transfer agent partner you should look for has not recently been involved in a merger or acquisition.

Questions for a transfer agent on their background and experience:

  • How long have you been in the transfer agent business?
  • Did your business begin as a transfer agent for alternative funds?
  • Have you worked with a variety of fund types and asset classes?
  • Do you primarily serve as a transfer agent for publicly traded funds?
  • Have there been any acquisitions or mergers in the last few years?
  • Could you provide me some advice on the optimal transfer agent procedures for my funds?
  • Are you a transfer agent registered with the Securities and Exchange Commission (SEC)?
  • Have you had a SOC 1, Type II audit of your transfer agent process controls

Why a transfer agent’s history is important:

  • Alternatives investments are a unique landscape in which transfer agent experience matters. There isn’t much in the way of standardization. In the field of transfer agent services, experience counts for a lot.
  • The role of alternate transfer agent is complex and unlike any other.
  • Broker-dealers, RIAs, wire houses, clearing firms, custodians, data aggregators, and other industry participants communicate with transfer agents. It requires practice to understand the players and how they interact.
  • Your transfer agent partner should be able to advise you on back-office best practices for your particular fund type, based on their knowledge.
  • Transfer agent firms that have been acquired or are in the process of being acquired can spend years adjusting to new systems, organizations, and corporate cultures.

Service Offerings Beyond Transfer Agent Services

All of your vital information will be managed by your transfer agent partner. The ability to integrate additional similar services with a single vendor can be very beneficial. Compliance, data security, uniformity, and timeliness as well as cost control are all aided by a transfer agent firm that can manage all fund data and back-office processes. Is the transfer agent firm able to provide a complete set of back-office services? Even if your current transfer agent requirements are modest, now is the time to examine how they may alter as your funds increase and your plans change.

Questions for a transfer agent about the scope of their services:

  • Do you offer services in addition to transfer agent services such as fund accounting, investor services, cash management, tax services and printing and fulfillment?
  • Do you have a web portal for investors and financial advisors?
  • Are you able to handle all investor communications, including mail, email, phone, and online?
  • Do you know how to handle capital calls and proxy voting?
  • Do you print checks, statements, notifications and other deliverables in-house?
  • Do you have any banking, valuation, audit, or other service referral partners?

Why a transfer agent’s range of services is important:

  • The more third-party service providers you have in addition to your transfer agent, the more communication problems, misunderstandings, and delays are likely.
  • By combining transfer agent and other services with a single partner, you can save significantly on overall costs.
  • Data security is jeopardized by frequent communication of sensitive data among multiple service providers in addition to your transfer agent.
  • It’s easier to handle a single full-service transfer agent relationship for all back-office functions than coordinating the efforts of several providers

The Flexibility of the Transfer Agent Services

Your transfer agent partner should be able to set up your fund and deliver services that are tailored to your needs, workflow, and business model. Your fund structure, asset class, fundraising strategy and business procedures are all one-of-a-kind. It’s critical to have a customized transfer agent solution. You should not be forced to work around the transfer agent’s preferences.

Questions for a transfer agent on their service flexibility:

  • Will you be able to set up my fund to meet all of the requirements of my PPM/LPA/LLC document?
  • Are you willing to collaborate with me and/or third parties to address specific transfer agent issues?
  • Are you able to personalize my investor statements?
  • Is it possible for you to customize my investor web portal?
  • Is it possible to tailor reporting output for a variety of audiences?
  • Is your fund accounting team able to handle a complicated waterfall?
  • Do you have the flexibility to adapt transfer agent solutions to changes we may make in strategy, structure, or investor type?

Why flexibility is important in a transfer agent:

  • Your transfer agent partner is there to relieve you of the back-office strain, not to force you to meet their standards.
  • The service and output of your transfer agent provider conveys your brand to investors, advisors and others in a variety of ways. You should control how your fund is represented.
  • Even if there are uncommon or complex features in your fund creation document, your transfer agent processes must adhere to them.
  • As time goes on, you may want to pivot to other investment strategies, asset classes or investor types requiring different kinds of transfer agent support. Will your transfer agent be able to service whatever kind of fund you may launch in the future?

A Crucial Decision

If you were developing an in-house transfer agent team, the people you would hire would have all the qualities of a top-notch transfer agent provider. The answers to these questions will help you determine whether a provider is qualified, equipped, and willing to be the right partner for you.

In Part 2 of the transfer agent buyer’s guide, there’s more to think about when considering transfer agent support for your fund.

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