Stock Transfer – Obligation or Opportunity?

Issuers, and too many transfer agents, view the stock transfer function as a recordkeeping obligation rather than an opportunity to compete with brokers for the care and feeding of shareholders.   Where do you buy your stock?   Probably at a broker, where you become a “beneficial” or “street” holder.   How do shares even get directly bought in the alternative, “registered” form?   It primarily happens through participation in an Employee Stock Purchase Plan, or a Direct Stock Purchase Plan, or DRIP.   You may also become a registered holder if you request a stock certificate evidencing your shares, or you choose to be directly communicated with by the company, or you eschew brokerage firms generally, or your granny bought you shares this way years ago.   Nothing prevents a person or institution from becoming a directly registered shareholder on the books of the company, as kept by the transfer agent.   The biggest hurdle is something the brokers have actually been cultivating for decades, and transfer agents have done little about until recently: convenience.   It has traditionally been much more convenient to own stock through a broker, because of these factors:

  1. No stock certificates to safe-keep
  2. User-friendly on-line access to records
  3. Clear and comprehensive monthly/transaction statements
  4. Other issuer communications available exclusively on-line
  5. Dividends readily reinvested
  6. “Discount broker”-level transaction fees
  7. Strong customer service representatives via 800#
  8. Telephone and on-line proxy voting available
  9. Easily accessible cost-basis information
  10. Multiple securities record-keeping on the same statement
  11. One-stop shopping for other financial services (like a bond fund or CD)
  12. Securities analysis in-house
  13. Stock lending available
  14. Short-selling possible

This is all true, but shareholders are increasingly learning (and could learn even more through education by issuers and transfer agents) that items 1 through 9 above are already in place at the better transfer agents.   10 through 14 are less important differentiators with the existence today of on-line services available to people via the internet; and, transfer agents are making in-roads with a number of those as well.   The point is: shareholders will decide how and where to own stock through their feet.   If issuers, via their transfer agents, make owning stock “directly” a pleasant experience, i.e.   comparable to the one at a good broker, more shareholders will own this way.