Why Are You Paying For A Financial Services Transfer Agency Company?

Why Are You Paying For A Financial Services Transfer Agency Company?

As a consultant in the IT Database world, I was once hired by boutique financial services company in Massachusetts who performed what is called Transfer Agency & GTC services. 

As much as I loved the money that I earned there I could not understand why any company would pay for services to transfer trades from their made up and sometimes registered funds for retirement to the actual investable market funds and pay a separate company to do it. 

First it may have to do with trust by having a go between to track all trades and then the resulting prices that either rise and fall with the market.

Second, it could be that it's just not worth their time to do this work because its just the ability to track what each participant paid into the fund, where the money is split by percentage, and where it ends up so in 20 to 30 years, there is a pool of dollars the participant can now pull out. A friend of mine referred to the Transfer Agency business along the same line as a janitorial service. 

Regardless of what it is thought of, the ability to track these trades and price them is simple algebra. A basic program that runs on the database management system and an ETL processor to load files from clients and a business intelligence system to spit out reports at the end of the trading and pricing day. 

Who are all the people in that company you are sending thousands to millions of dollars to?

You ever ask yourself why it takes more people to track your trades than a simple accounting firm or trading floor?

There are unique aspects to each account but programs can and have been written that allow so many different possible calculations to occur. 

What is it about their service you love so much? 

Do the invest in better technology?

Have you asked them about their servers, their versions of the databases they use? 

Is it a product that can be installed or is everything piecemeal and they have 100 or more clients scattered over 100 databases they cannot access easily?

I am not trying to diminish any aspect of the services those companies provide. 

If you don't want to do the work or regulations prohibit in house processing that's fine, but let's take a look at this from a perspective of the CIO and IT. 

If you first went to this company in 2010 and you saw just a few people in IT but then you went five years later in 2015 and saw double the people on the IT staff programming and engineering client accounts, you are looking at a CIO with no vision with this caveat, the CEO could have prevented any normalization to occur inside of IT. 

(CEO's are responsible for some of the worst programming of client accounts because, the clients don't ask enough questions when reporting takes a long time or trade and pricing errors occur.)

Here's why.

The company's IT vision should have programmed itself out of the programming business and only into the maintenance and upgrade with far fewer people than when they broke through their bottom line from red to black. 

Today so many companies coming out with the next best app or website to provide exemplary services have spent the time and money into the part of the business that needed to be the fastest, most accurate, and quick reporting of all transactions and pricing. 

Information technology is expensive and when the company has adhoc client programs that are all different from another, and require full time engineers to program new clients around fixing the problems with existing programs instead of how other industries have clerks and data entry people who are far more inexpensive to pay because the investment was done in the beginning to make the most efficient and easy to use application and database for the analysts, money managers, clerks and the one or two staff engineers needed to maintain those systems. 

You shouldn't be giving free money away to companies who don't care about their own infrastructure. No company should you pay for should require more engineers for every five new clients. You could be paying half the amount you do for cost accountants to track everything with spreadsheets instead.

Let me be clear, if the account manager with the TA or GTC holding company talks about the programmers and engineers getting their account ready, you are with a company who does not have a future.

Why would you pay $100,000 to $1,000,000 per year to a company that would shut off if they lost their programmers?

Programmers need and want to program efficient code into programs that can serve the purposes of your retirement funds. There is zero excuse for a company to keep growing personnel in their IT departments to serve a growing client list. More clerks, more servers, account managers but the program should be so stable and packaged within a reasonable time period after breaking through into the black.

One last little bit of information to ask yourself. How often does the company have to write a check for an accounting error to put your accounts back in line?

"At least they make it right?"

No dumbass, they fucked up because their system is shit and cannot process your modern fund. 

Ask lots of questions because you are probably wasting money. Seconds counts in this business. 

Now my perspective of the screwed up company I was in and forced out when I and another seasoned programmer offered, within our current pay scale, to design and write a better modern product. 

I would thank God, at least three times per week that the process worked as we missed major mistakes by milliseconds. 

I watched whole day's trades be wiped out because engineering had access to production environments databases at the lowest most accessible levels and have to recreated because there wasn't a basic $4000 program to immediately return deletes back into the systems. 

I won't be naming names or making accusations at any company but all I want is for you to ask a ton of questions and really see what is going on when your money leaves your hands and you expect it to be there on the other side. There is no stealing or embezzling going on. It's just that costs of doing this business should be quite low as it is so inexpensive to create the right programs that are needed and spread that cost around.