Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

Checklist of "BEST PRACTICES" in Evaluating and Selecting a TRANSFER AGENT

We first published this article in 2003 and, believe it or not, it didn’t need much updating until recently, other than to note that there has been a very good market for buyers of TA services and a very difficult one for sellers throughout this long period of industry contraction.

But over the last 2-3 years the pace of change has accelerated a lot - driven by the very sharp decline in the number of registered shareholders - and, as a result, in a huge decline in the number of transfer agents. The field of agents that will pass the sniff test with medium-to-mega-cap companies, and their boards, is down to four agents at best.

But oh…watch out, dear readers…More and more public companies are insisting that corporate citizens shop around - and put all of their important supplier-services out to bid every three years or so. Also, while IPOs have been few and far between of late, they’re still out there - along with a fair number of spin-offs too - where a decision on the Transfer Agent must be made.

Accordingly, we realized that an update on assessing transfer agency services, and on obtaining and evaluating bids on a big family of products and services that is mighty arcane subject matter for most of our readers - and making the really big decision on where to place your chips - was long overdue. So here’s our just-updated version of one of the OPTIMIZER’s all-time-classic articles:


  • Step-one in our book is to think long and hard about the kinds of things that are most important to you – and to your company - when it comes to your dealings with the transfer agent: A “high-tech company” might put “cutting-edge technology” highest on its list. Companies that follow the “six-sigma process” may place the highest emphasis on quality control programs, although one such company - very shrewdly we think - awarded most points for the programs agents had in place to attract, retain and reward excellent staff. Some companies place their highest emphasis or on where they will “rank” relative to other TA clients - and this is very much worth considering these days. But the smartest of all, we think, put the highest emphasis on “personal service” - and on the caliber and knowhow of the people who will be assigned to their account.
  • Be sure to talk with all the areas that interface with the TA - the Corporate Secretary, Chief Governance Officer, the General Counsel - and the IR, Treasury, HR, Corporate Communications and Public Affairs offices - to inventory all requirements, and to focus on any special requirements, expectations or “issues” they may have. Companies that have stock option plans, restricted shares, 423(b) or other employee ownership plans, for example, will want to pay particular attention to the capabilities of each agent and their ability to interface smoothly with related service providers like brokers, plan trustees and record keepers, as well as your own company’s payroll, tax and accounting departments.
  • Ask yourself - and your colleagues - if there are likely to be any new service needs coming down the pike where your TA will be a key player – like a “global option plan,” a new restricted-share program, an ESOP or a DSPP for example.
  • Rank your list of current and potential requirements in order of importance...but keep your options open. Sometimes your original priorities change dramatically as you survey the field.
  • Develop a very short RFP; one that requires respondents to focus intensively on your top-ten or fifteen concerns. Regular readers of the OPTIMIZER know how much we dislike those “canned RPFs” that have been making the rounds like chain letters. Aside from the unwieldy length, and the questionable relevance of the questions that have crept into so many RFP templates over time, the major problem with old-time RFPs is that agents respond with even lengthier “canned answers,” straight from their word processing systems. So please read our new article on RFP-Lite.
  • Plan to award points for brevity, and for staying on-task with answers to your top issues, we say...and to subtract points for “canned responses.” Subtract even more points for any of your top-ten concerns that are not adequately addressed, we say, since you really want an agent that pays attention – and that is responsive – and, ideally, is proactive when it comes to your needs.
  • Be sure to include a section that asks respondents to spell out ALL the out-of-pocket expenses they will expect you to absorb - organized by category. (Related, for example, to dividend payments, tax reporting, the annual meeting, the DRP or DSPP, to shareholder communications, insurance, etc. - along with unit prices and estimated totals. Some agents, as we’ve reported before, are either incredibly bad shoppers for basic supplies, or are treating the expenses they lay out for you as a “profit center.”
  • Attach a list of all the activities your current agent performs for you and all the pertinent unit-volumes: Pay special attention to services where the TA needs to interface with other third- party providers, so respondents will know exactly what they’re bidding on – and so there are no unpleasant “surprises” later.
  • The RFP process also presents an important opportunity to look ahead – and to ask for and compare pricing information on any services you may wish to implement in the future - like DSPPs, ESOPS or odd-lot buyback programs, stock splits, cash or stock dividend payments and merger processing services. Many times, in our experience, the “least expensive agent” proves to be the most expensive by far when situations arise that were not specifically covered by the RFP.
  • Here’s another new area where issuers need ironclad assurances and a firm plan, should they decide to change agents: the willingness of a new T-A to accept, and convert, or otherwise preserve the shareholder records that have been created by any and all prior agents: Many of these records may be decades old - and many of them have likely been created by transfer agents that are not in business anymore! (Read our article on Transfer Agent Liabilities to see how important these records can be.)
  • Get help from an industry expert: There are several firms (including our own) that can help companies through this process, which can become quite a time consuming one. It’s also a process where understanding and buttoning-down all the “fine details” usually makes a world of difference. If you are not an “expert” on such matters, it will literally pay you to hire one.
  • Buckle-down for a fairly lengthy process: Typically, it takes at least three weeks to canvass your colleagues and get your RFP and your game-plan together; another three weeks to receive responses; at least a month to evaluate them.

And don’t forget that it usually takes at least 45 days more to notify the many people that will need to know – and to convert the shareholder records in a smooth and orderly fashion – should you ultimately decide to change agents.


This is the one part of the process that actually got a lot easier since we issued our first set of check-points: The industry is now down to no more than four players that can pass the sniff test with medium-to-mega-cap companies and their boards. (Virtually all of them are represented, we should note, in this Special Supplement and in our Online Directory of Pre-Vetted Service Suppliers. If you are subscribers and want to ask a few questions, “some free consulting” comes with the subscription - and we are always happy to speak with readers.)


  • Start with the fees: Even though we tell our clients that this is the least important of the issues (once you’ve decided on the agent that’s really right for you, the money will always work out, we find) it is important to list each and every one of the required services - and each of the services that you may need or want down the line - and to enter the fee that each agent is proposing to charge - if any - because these days, most agents tend to offer a “bundled” fee for “basic services.” You will probably be surprised by the number of times it will be not at all clear that a given service is included in the “bundle.”
  • Create a similar matrix for the out-of-pocket expenses. This will help you determine that all such expenses are accounted for by each agent, and are on an “apples-to- apples” basis. Wide variances, which are common in our experience, will also help you identify missing items, “bad shoppers” - or those with excessive markups. Sometimes you will find that the quality of such things as checks, envelopes, etc. may be in excess of what you really need – or may not be up to your company’s standards. Big variances may also indicate that the bidder is proceeding under faulty assumptions...or simply made a mathematical mistake.
  • Next, create a matrix that will list each of your 10 or 15 top issues and allow your team to enter notes on their qualitative evaluation of each agent. While some of the data – and often many of the demerits too - can be entered after reading the responses, the most important points, in our experience, need to be evaluated first- hand. (See the sidebar for your editor’s top-six decision points)
  • Schedule a site visit with each “finalist”: This is the only way, in our opinion, to get at the qualitative issues. Complete your evaluations as soon as possible after each visit. Since all of the agents on your short-list are clearly capable of performing all the usual functions in a creditable fashion, the “scores” are likely to be very close. Thus, we find it helpful to assign numerical weights to each of your most important decision points, and to multiply by the numerical scores – in order to sharpen and conclude the analysis.
  • Network with and obtain references from clients of each finalist who have servicing needs, philosophies and styles that are like your own: Although each agent will provide you with a list of references, and recent wins and losses, do some digging on your own. And sometimes, the “references” you’ve been given by suppliers will surprise you!
  • Do not place a lot of reliance on those so-called “transfer agent quality” surveys: As the OPTIMIZER has noted on many prior occasions, they have a variety of flaws - too numerous to mention here. But the bottom line is that they have little or no statistical validity and only modest “directional validity.” You need to be benchmarking against companies like yours; not against an unknown universe of respondents whose needs and expectations are equally unknown to you.


  • Most transfer agents have a fairly standard “contract” that spells out their responsibilities to you and your shareholders – and your obligations to the agent – in considerable detail. Be sure to review this contract with care – and to involve your legal counsel too – before awarding the business.
  • Pay particular attention to the notification, indemnification, termination, renewal and “assignment” provisions. Regular readers will recall, we hope, some of our “horror stories” about such things as one-sided indemnification provisions, unrealistic “limits” on the agent’s liability, automatic renewals if a company fails to give early notice and shareholder records “held hostage” during disputes over termination fees.
  • The fee and service proposal – with any and all amendments that may have been made during the evaluation and negotiating process – plus any and all commitments the agent may have made with respect to performance – should, of course, be incorporated as part of the contract.

Please read below for Top-Six Items in Choosing a Transfer Agent, designed to make a difficult decision as easy and as clear as possible.

Your Editor-in-Chief’s Top-Six items in choosing a transfer agent - from the perspective of someone who spent 32 years inside the business:

  1. The quality of the top management team; specifically, the background, experience and stability of the team; plus the way they relate, as people, to each other and to the rank and file is still the number-one item to look at in our book. If things are in excellent shape here, all else tends to be - and tends to stay - in proportionately good shape, although to tell the entire truth, many of the best players have been through a few rough patches over the years…usually following big systems changes, location changes and top-management turnover.
  1. Since our last version of this checklist, however, there has been another MAJOR issue to consider up front: The likely “staying power” of each of the agents on your short-list. When we first drafted this checklist in 2003 there were more than a dozen transfer agents that could basically do the job. Today, we are down to four or maybe five. And readers, there is really no room in this still shrinking industry for more than three “mainstream agents” to survive over the next 3-5 years, we say.
  1. Next in importance are the kinds of people, systems, procedures and technologies that are employed to provide fast, responsive and “caring” services to shareholders - and to YOU. After all, this is what you’re really paying the agent for.
  1. Equally important, and a very useful tie-breaker here, are the qualities of the person who will manage the relationship day-to-day; in particular; how much they know about the business and, even more important, how much influence they appear to have within their own organization...to work on your company’s behalf...and yours.
  1. What used to be the last item on our list is your team’s assessment of the kinds of systems, procedures and technologies that are employed to make life easier for clients, shareholders - and for the agents themselves. This, we guarantee, will reduce costs to your company.
  1. Today, however, we need to add a sixth, critically important factor -and one that can be very hard to get a good handle on - the overall strength of the agent’s data security, records-retention and backup systems - and, especially, the strength of their cyber-security systems.