Your Transfer Agent as a Profit Center

A top-tier transfer agent organization can considerably improve fund management's potential to make money in a number of ways.


Your Transfer Agent as a Profit Center

We’ve considered the numerous ways that using a transfer agent saves your fund money. However, it gets even better. A top-tier transfer agent organization can considerably improve fund management’s potential to make money in a number of ways. As a neutral third-party provider of back-office services, your transfer agent partner is obviously unable to introduce capital, suggest new investors or promote your investment product in any way.

Even so, if the transfer agent provider has extensive expertise, is well equipped and is truly aligned with management’s aims, there are various ways your transfer agent infrastructure can drastically boost management’s potential to generate fresh capital.

So, where does new capital come from, and how can a transfer agent help you raise more funds?

Existing Investors - The Transfer Agent Experience and Why They Reinvest

Unless they experienced a bad transfer agent experience, existing investors are the most likely to invest in a sponsor’s next fund. Management has established a rapport with these investors, educated them with the company’s business processes, and presented them with the benefits of management’s expertise in the form of favorable returns on investment. Transfer agent services, however, are an important element of the investor experience. On a day-to-day basis, how has the transfer agent performed? Have investors received tax documents on time? Is the transfer agent’s financial reporting clear and understandable? Has your transfer agent team responded to investor questions in a timely and friendly manner? Do investors have access to their account information via a modern web portal provided by the transfer agent that meets their needs, providing relevant documents such as statements and tax forms, and allows them to connect effectively with management?

A transfer agent company that cares about investor perception of management will always provide clear, accurate, and thorough information, react to inquiries immediately, and send timely reporting and tax paperwork. Consistency in transfer agent services provides investors with a sense of security and satisfaction with their investment decision, boosting their likelihood of investing in future funds from the same sponsor.

New Investors- How a Transfer Agent Can Help You Sell

It takes knowledge to source new investors for your fund. Data that can be used to make decisions provides insight. The investor record-keeping system of your transfer agent partner should give actionable data. However, this is a rarely seen. Only a few transfer agent companies have developed technologies that can provide thorough sales and marketing reports based on data from the transfer agent system.

Transfer agent firms use ‘investor record-keeping’ or ‘transfer agent’ systems to manage their clients’ investor databases. Transfer agent firms have devised or adapted a variety of system solutions to manage the back-office activities of fund sponsors since the alternative investment market lacks a single record-keeping technology. Some transfer agent systems are tweaked versions of systems designed for publicly traded funds, which have quite distinct back-office needs. Some are a jumble of systems that have been cobbled together in an attempt to provide all of the functionality required by transfer agents. Some ‘transfer agent’ systems are merely repurposed CRM systems.

Only a few transfer agent systems are designed from the ground up to manage specialized alternative investment funds. Fewer transfer agents have the ability to integrate investor, advisor, sales and transaction data to deliver relevant insights to the fund sponsor’s sales staff in order to facilitate new sales.

With such a transfer agent system in place, sales teams can find new investors by identifying the most fertile ground highlighted by previous sales success. An advanced transfer agent system’s reporting capability discloses which financial advisers have the finest track records, who are the most dependable and long-term investors, which geographies are the most fertile, and what the demography of the top investors looks like. A transfer agent system can provide important sales intelligence to management, allowing them to raise more capital. Only a sophisticated transfer agent system with complete reporting features can turn transfer agent data into useful sales information.

A transfer agent system can also help sales by making the new investment procedure more efficient. Connectivity to industry platforms like AIP and DST FAN Mail, as well as transfer agent system connections with electronic subscription systems and direct digital inputs from client website subscription forms bring alternative fund investing closer to the experience of participating in a mutual fund.

Financial Advisors - There Are Transfer Agents They Much Prefer

A transfer agent’s reputation among financial advisors also helps with sales. Advisors want smooth interactions with transfer agent companies, with few errors and delays, and the most efficient data flow and communication possible, resulting in speedier admit dates. The connectivity of a transfer agent system is also important. Broker-dealers, RIAs, wire houses, custodians, family offices, AIP, DST FAN Mail and other industry participants should all have live digital access to transfer agent systems to help investors and advisers have a better experience.

Data homogeneity and real-time data transmission to and from the transfer agent make everything easier for financial advisers and eliminate uncomfortable delays and uncertainty. If a phone interaction is required, a responsive, well-informed transfer agent firm capable of promptly resolving issues makes a positive first impression. Advisors appreciate working with that transfer agent and, as a result, with the company’s clients. This will almost certainly have a positive impact on sales.

Institutional Investors - Their Heavy Demands on Transfer Agents

The largest investors, pension funds, endowments and family offices, regard high-quality outsourced transfer agent services as part of their due diligence process for candidate funds. Many financial institutions think that fund sponsors who operate in-house transfer agent teams take an unacceptable operational risk.

Many institutional investors are members of the Institutional Limited Partners Association (ILPA), a trade association for the industry. ILPA recommends its members seek financial reporting from their portfolio investment funds that follows the ILPA Reporting Template because they want maximum transparency for their stakeholders. The transfer agent partner must be able to create a complete reporting package that breaks down portfolio performance, compensation rates, costs, depreciation, and every other line item and metric of the fund in granular detail. This transfer agent reporting challenge must also include detailed reporting on the fund’s adherence to any and all portfolio investment limits and restrictions imposed on the institution.

Even for those transfer agents who can generate the ILPA template, it is a time-consuming and resource-intensive operation. The ILPA Template is far above the capability of most transfer agent firms. If a fund wishes to attract institutional investors, it will need an institutional-class transfer agent who is familiar with the ILPA template and can rapidly prepare it. When it comes to fund raising, having a transfer agent provider with the reporting ability to qualify a fund for institutional money is a major bonus.

The return on investment that management has been able to generate is what attracts investors to a fund. Fund management has the right to expect a return on transfer agent services, a return that goes beyond the mere fulfillment of transfer agent responsibilities and has meaningful financial benefits.

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