For the latest issue of Asset Servicing Times, Elena Casalegno, Head of Transfer Agency Operations and Shareholder Services at EFA, shares her vision of TA's business, its evolution and how technological development impacts the role of transfer agents.


How has the role of the transfer agent changed in the past few years?

The role of transfer agents has not changed materially in the sense of the functions it performs, but specialisation in certain aspects of these disciplines has increased significantly. In practical terms, transfer agents continue to maintain the accounts of shareholders, for both financial institutions and retail investors, but they are required to collect and maintain significantly more data for the purposes of exchanging information with tax authorities and for anti-money laundering and financing of terrorism controls. While most individual accounts are relatively straightforward to administer for both tax and identification purposes, institutions and other investors whose holdings are acquired and held through financial intermediaries require transfer agents not only to look through intermediary custody and order placement networks, but in many instances to replicate these structures on support systems to demonstrate that reviews have been performed and for ongoing screening purposes.

How is the rapid pace of technological development within the industry impacting the role of transfer agents?

The main effect of technological development has been the introduction of complementary tools that add communication options, enhance secure counterparty identification or reporting, and provide data for analytical purposes. The application of technology in these areas has enabled transfer agents to provide clients with both reference and transaction data covering the activities of their funds, along with channels to receive or access this information with varying levels of authentication to ensure data security. Overall, technological developments have helped transfer agents to manage new regulations requiring the disclosure, reporting and monitoring of client and investor activity, but so far no game-changing disruptive technologies have emerged with a material impact on services provided to mainstream asset classes.

How are transfer agents adapting to the rapidly evolving business environment?

Amid intense cost pressure and demand from clients for a more extensive range of services, transfer agents will need to deploy smart technology on an ongoing basis in order to service clients or weigh up the risks and rewards of providing services. While a competitive environment that delivers value for money to clients and their investors is healthy, it’s also important to be able to define what is being provided and at what cost during new business negotiations and in-service reviews. If there is a gap between the client’s service expectations and what is delivered, the disconnection will sour the best of relationships. Currently the quality aspect of service is not prominent enough on the agenda of transfer agents and clients negotiating the cost of service.

With regulatory compliance entailing increasing levels of manpower and costs, it may become difficult for smaller transfer agents to keep up. Will this result in a consolidation of the sector?

Recent history has shown that applying technology to scalable processes has enabled organisations in many business fields to reduce costs, and invariably the marketplace evolves with the emergence of large-scale players with lower unit costs alongside higher-margin specialist boutiques and captive operations with a primary focus on the client experience. The cost of regulatory compliance without sophisticated technology is a heavy burden, since regulatory processes are scalable only to a limited extent. Take the measures to curb money laundering and the financing of terrorism – there is a real need for well-designed, configurable technology solutions to address the varying legislative approaches and regulatory interpretation among EU member states, and the risk-based approach methodology of each customer’s compliance function. To maintain compliant up-to-date records for the same financial intermediary, whose risk profile might differ according to how it is assessed in business relationships with two different customers, poses various procedural problems, in addition to the frustration of having to explain the difference to the financial intermediary. Until technological solutions are available to enable transfer agents to manage these complex issues, size will have limited impact on market strength – regulatory risk is likely to be a deciding factor.        

How do you see the transfer agent’s role changing over the next five years?

The coronavirus pandemic has resulted in most of the financial sector, including transfer agents, operating remotely, with most employees confined to their homes. This has highlighted the long tail of legacy communication methods, with delays in receiving original documents sent by post, instructions of various kinds that are still faxed from banking and wealth management systems, and documents sent via various telecommunication channels that lack provenance and whose authenticity would be unlikely to pass legal scrutiny. Over the next five years transfer agents will need to jettison their old technology and communication channels and identify new solutions that eliminate the cost and friction of outdated media that take a disproportionate amount of time to service and often result in disgruntled clients. They will need to offer alternative communication solutions that are secure, intuitive to operate and demand minimum effort for adoption – remembering that clients are often asked to deal with solutions from multiple counterparties that are burdensome to install, maintain and operate. That’s hardly a recipe for success in the age of fintech.