[THOUGHT LEADERSHIP | FIS]
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.
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 disinter-
mediation 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 provisio ning 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.
Spring 2020
globalcustodian.com
25