Transfers in the Mutual Funds Industry
Mutual Fund Services is moving closer to expanding its automated processes to solve the problem of transferring retail or retirement fund holdings from a broker/dealer to a fund company – or vice versa – which has become one of the industry’s “pain points.”
Mutual Fund Services is offered by National Securities Clearing Corporation (NSCC), a DTCC subsidiary.
Problem with transfers
When a customer decides to make this type of transfer, there has been no easy way to handle it. It’s usually done manually, through faxes or mail, and it can take from four to eight weeks to complete.
“It gets further complicated because there are several different types of transfers that involve combinations of retail and retirement assets,” explained Barbara Simon, DTCC vice president, Wealth Management Services Product Development.
A simple transfer would be an in-kind transmission, where a customer owning fund shares in a retail brokerage account wishes to move those same assets to the fund. A more complex scenario would be one in which a customer with fund shares, stocks and bonds in a firm’s self-directed retirement account decides to shift the assets to a fund retirement account.
“We’ve identified two services that are well suited to handle these transfers,” Simon said. One service is ACATS-Fund/SERV, which was created to handle the reassignment of assets from one brokerage firm to another, as well as re-register those assets on the books of a fund company.
The other is Transfer of Retirement Assets, which moves the assets and value in fund-sponsored Individual Retirement Accounts from one fund to another. “Both have functionality that can be leveraged. At this point we’re discussing whether the right solution for the industry is with one of the two services or a hybrid of both,” Simon explained.
Next steps
Mutual Fund Services is partnering with the Investment Company Institute’s (ICI) Broker/Dealer Advisory Committee (informally called BDAC) to push this initiative forward. Once recommendations have been finalized, they will be presented to the fund community for feedback. “After we receive comments, we’ll make the necessary changes to the services, create a fee schedule based on projected transaction volume and present a rule amendment to the SEC for approval,” Simon added. Launch plans will be announced next year. @