Coronavirus Impact on Stock Transfer Agents
We canvassed some of the largest stock transfer agents in the U.S. and, coupled with our own observations, came up with this list of the most significant effects on the stock transfer industry that Covid-19 is having….
- More hygienically safe workplaces, not that they weren’t safe before but now they adhere to more stringent Covid-19 protection standards.
- Especially more safe mailrooms, the venue at transfer agents with the most extensive inflow of potentially “infected surfaces.”
- More employee work-from-home, especially in the most affected Covid-19 regions of the U.S. Over the past 25 years there has been more “remote” employment at transfer agents relating to functions like client relationship management, but now agents have to get creative with remote processing involving activities traditionally done in “close formation,” like stock transfer operations. One way to do this is splitting up and moving teams into different locations within a transfer agent’s brick-and-mortar facility, so everyone isn’t sitting in the same place.
- Less travel to clients by transfer agent relationship management and senior executives, and to prospective clients by salespeople – and vice versa. We imagine agents will soon pursue more video conferencing to fill this void.
- Less attendance at industry association meetings and conferences by transfer agents and clients/prospects (if they are being held at all), potentially dampening sales opportunities and the valuable two-way exchange of information.
- More virtual annual and special shareholder meetings. This helps companies from a reputational, corporate governance and even compliance perspective but can also, ironically, cost them more in technology fees than a physically attended meeting. Virtual meetings generally favor transfer agents in that a couple of them (one in particular – Broadridge) facilitate such events for an extra charge, and those that do not benefit from less work to do than with a physical meeting while still tending to collect standard fees as if they did – plus surcharges for shareholder file exchanges between the agent and virtual meeting facilitator. We should add that while Broadridge is earning extra fees to provide virtual meeting functionality, it is fortunate for the industry and the country that Broadridge got a jump on this service innovation long before Covid-19 came along, so the extra fees it is earning would appear fully justified.
- Fewer corporate actions for transfer agents to handle, and on which to make money. Ironically, though, fewer corporate actions also means fewer eliminations of the “acquired party” in a merger, thus keeping that company as a client of its transfer agent.
- Fewer IPOs, with a similar negative effect on transfer agent revenue.
- Lower balance earnings due to fewer corporate actions, where agents are entitled to hold the cash portion of purchase consideration “up front,” and also due to downward pressure on rates overall by the Fed during this national emergency.
- Laudable refusal by transfer agents to relax protective procedures in the face of the pandemic, like requiring medallion guarantees on share transfers even when a party, like a broker, claims it is too difficult now to obtain such a guarantee.
On the bright side, we think when this huge challenge is behind us – and it will be – the stock transfer industry will have better workplaces, be more efficient, offer more creative tools and services, and enjoy enhanced relationships between agent and client to the financial benefit of both parties.