Transfer agents join big firms that offer more services
With many other parts of the increasingly complex shareholder communication and services business, the world of stock transfer is undergoing changes. Over the last several years we have seen significant consolidation among the transfer agents and many of the players that remain are expanding their services beyond the traditional arrangements.
A growing number of large transfer agents are joining big institutions that also offer proxy solicitation and brokerage services. This one-stop-shop approach is becoming the norm and in some ways makes managing the relationship with your commercial transfer agent all the more important.
One-stop-shop
While having a transfer agent who can perform a number of different functions is desirable to many companies it is by no means universally coveted. Kristina Veaco, founder of Veaco Group and former corporate secretary at McKesson, says, ‘I like my transfer agent to be my transfer agent. A number of agents are trying to expand into new areas and provide new services but, for my situation, this was not the best model.’ She explains that this is especially the case with proxy solicitation services, which should be kept separate from the registrar.
Christina Zicaro, manager of stock services at AIG, maintains a different viewpoint: ‘We recently moved to a new transfer agent specifically because they are able to offer us a broader range of services, which we feel are beneficial to the shareholders and the company,’ she explains. As a multinational corporation with offices around the globe, AIG finds it benefits greatly from having a transfer agent who can also offer banking services, such as processing payments through direct deposit, as well as brokerage services. Zicaro points out that ‘it can be expensive for international employees and shareholders to transact on divided payments denominated in US dollars.’ She also notes that employees, and other shareholders for that matter, have the option to use the transfer agent as a broker, but are not obligated.
Know what’s good for you
When choosing a transfer agent, or considering a move, it is important to carefully evaluate exactly what services you will, and will not, need. Smaller, single entity companies do not need the same range of services that a S&P 500 multinational will and should make sure they are not paying for things they don’t need.
Zicaro recommends taking a good look at your own company before shopping around for an agent. ‘Ask yourself some key questions: How international is the company? Do I have a Dividend Reinvestment Plan (DRIP) or Direct Stock Purchase Plan (DSPP)? Will we need 24-hour support facilities? Am I the sort of person who likes in-person contact? All these things are important to understand before deciding what you need from the transfer agent.’
‘At the end of the day it really comes down to service, not only the service you receive as the issuer but also the service your shareholders receive,’ counsels Veaco. You need to feel comfortable with your agent because there will be times that things go wrong or need to be done urgently and having the ability to pick up the phone or go and visit face-to-face will be a great asset in the difficult times.
Andy Wilcox, managing principal of Shareholder Service Solutions, agrees that service is vital. ‘One of the most important things for any issuer is the transfer agent’s communication infrastructure. It is very important to assess the online tools of the transfer agent. You will want to be able to get online and print out reports or conduct basic analysis on your own,’ he explains. But the experience for the shareholder is just as important as that of the company, if not more important.
In this age of heightened shareholder communication, it is crucial that the transfer agent has professional, secure and easy-to-use tools which the shareholder can use to effectively monitor and transact their holdings. Wilcox points out that ‘the last thing you need is having shareholders call you with complaints about the transfer agent.’ Some issues that have come up in the past are transfer agent communication center employees that were not sufficiently knowledgeable to answer questions or did not have appropriate language skills (you may have people calling from other nations) to make themselves understood. Other related problems included not enough or low-quality phone lines leading to long ‘on-hold’ times, as well as poor internet interface.
For Exelon, the single most important element in choosing the transfer agent was its ability to provide a ‘best in class’ share exchange tool. According to Tom Boin, senior corporate governance analyst at Exelon, ‘Our primary performance objective [when it comes to the transfer agent] is shareholder satisfaction. It is not just about efficiency or low-cost provision but the best all round shareholder service.’
Measuring value
One interesting approach that was adopted by Exelon is the use of an independent outside survey firm that collects data on a range of shareholder satisfaction metrics. These reports are given to the company before being shared with the transfer agent. ‘This helps to inform our conversations with the agent as we can see which, if any areas shareholders are not happy with and this way we can target specific things that need improvement,’ Boin explains. ‘We find it has been a very useful exercise.’
Zicaro stresses the need to develop a solid understanding with your transfer agent. ‘You need to make them understand what your expectations are,’ she says. With a lot of clients, when they ask for a report they are quite happy to wait a few days but if you are the type of person or company that needs things done within a specific timeframe then it is important that the agent understands this. ‘My agent knows what I mean when I say I need a report straight away and they are usually good at delivering but that is only because we had the conversation up front,’ says Zicaro.
Apart from the general activities of a transfer agent, Wilcox highlights the importance of the agent in assisting the issuer in other areas. ‘They should have a sound knowledge of some of the issues facing public corporations.’ At the top of this list are issues such as notice and access, direct registration, possible impact of cost-basis accounting and, for Wilcox, ‘the ability of the transfer agent to handle the full range of direct registration system (DRS) transactions.’ He cautions that some agents are better equipped in the DRS field than others, and that following new regulatory changes, this area is going to be very important.
Issues such as longevity and a proven track record will also help to inform a company when looking for a new agent, or assessing their current provider. But it ultimately comes down to finding the right relationship between the company and the agent that can deliver the desired level of shareholder service. Overall, for most companies, this is more important than a few thousand dollars here or there.
