How to Save Stock Transfer Agent Costs

Stock transfer is an important function for public companies, which is why all but a relative handful of them have entrusted it to outside professional transfer agents.   At the same time, however, the number of transfer agents itself has shrunk to a relative handful, lessening competition and the associated engine for fee containment in the industry.

How can a corporation keep its stock transfer costs down, at the same time ensuring its transfer agent earns a fair return for its efforts and a cushion for R&D investment?   We will start with some straight-forward but often over-looked tools:

  • Ask your transfer agent if your current fees are “competitive,” in light of the probable drop in registered shareholders the agent is handling for you
  • If fees are currently charged as a flat monthly dollar amount, and the company’s registered shareholder base is indeed declining every year, have the fee basis changed to per-shareholder-per-month
  • Review the last six months of transfer agent invoices and, if there is a particularly large dollar amount or an item you don’t understand, get clarification on it from the transfer agent right away
  • If there are out-of-pocket expenses in these bills that are priced higher than would seem logical (like postage higher than what a stamp would cost), get an explanation there too
  • Invite a competitive bid or two from alternative stock transfer providers, from time to time

And here are some less obvious sources of stock transfer savings you should consider:

  • Discuss with your transfer agent the use of lighter weight paper for shareholder communications
  • Discuss the use of no paper by eliciting agreement from shareholders to receive more company communications electronically, perhaps providing incentives to so choose via “tree-planting” or “donation to charity” options
  • Selectively “drop ship” shareholder material depending on its quantity, weight and urgency
  • Pointedly ask the transfer agent if there are postal (volume) discounts it could be passing on to you, and is not
  • Push back against Notice & Access charges for shareholder meetings that do not seem commensurate with the transfer agent’s effort (like “set-up” fees)
  • Ensure “householding” of proxy materials is happening
  • Investigate delivery of all shareholder communications to employees who have a computer via the intranet, on an implied-consent basis
  • Discuss the combination of communications in the same envelope to the same holder owning stock in multiple forms (e.g., common and preferred)
  • Consider an odd-lot shareholder reduction program administered by your transfer agent, or your proxy solicitor (gets bids from both)
  • If you are a dividend paying company, promote more use of “direct deposit” into shareholders’ bank accounts via ACH
  • If you have a DRIP or Direct Stock Purchase Plan see if it is possible to suppress mailing quarterly dividend reinvestment statements/advices with the implied consent of the participant, mailing only an annual one
  • If you have a DRIP or Direct Stock Purchase Plan see if you can elicit consent from odd-lot, non-plan holders to have their dividends automatically reinvested in the plan
  • If you have a DRIP or Direct Stock Purchase Plan and currently no way to prevent small, even fractional share accounts since it is more costly for the participant to sell than simply abandon the shares, implement a minimum share ownership amount under which the agent must automatically cash out the participant, at a reasonable cost
  • Have the transfer agent fully explain its duplicate shareholder elimination practices
  • Have the transfer agent fully explain its inactive/closed account purge and archiving practices
  • Question any OFAC screening fees/expenses
  • Question any SSAE 16 report fees
  • Question fees to keep up with regulatory changes, essentially stress-testing the difference between a “sudden expense” to the transfer agent and what it should have anticipated as a cost of doing business
  • Question fees charged by the transfer agent to process record keeping updates from other vendors hired by the company, like a post-merger lost shareholder search firm
  • Determine if monthly expenses for a shareholder inquiry 800 number seem logical, especially if the company does not have its own dedicated line
  • If the agent charges a monthly “miscellaneous” expense of any size, ask for a full explanation and justification for it
  • Question relationship termination fees
  • Explore whether your transfer agent could support a program where registered shareholders are invited to move their shares into “street name,” saving transfer agent charges, with an incentive offered to do so like a gift card
  • Explore whether available data bases like employee records could be cross referenced against the company’s registered shareholder file, to uncover individuals over 80 years old who might be deceased

These are examples of areas you could investigate with your transfer agent, and you could also retain Shareholder Service Solutions to do this for you so that you stay focused on your immediate priorities, get this due diligence done promptly, and save considerably more money on a recurring basis than our modest, one-time fee.

If you would like a short proposal for our applicable Shareholder Services Check-Up®, just go to the “Contact Us” section of this web site.