Switching fund administrators is an important decision that can significantly impact your fund’s operations, governance, and investor relations. Whether you are looking for more personalized service, more advanced technology or better aligned financial terms, understanding the process and the key considerations of a fund administrator transfer is essential. This guide provides a roadmap to help you switch administrators efficiently and with minimal disruption to your fund’s operations.
Why Consider Switching Fund Administrators?
Fund managers may choose to switch administrators for several reasons. Poor service quality, slow response times, inaccurate reporting, high staff turnover, or a lack of client focus, are often factors. Many managers also face issues with unclear fee structures, where fees may increase unexpectedly, unrelated to the level of service. Outdated technology can hinder operational efficiency if the administrator lacks automation, advanced reporting tools, or fails to support the specific needs of your asset class.
In some cases, an administrator may struggle to scale with a fund’s growth or may lack the expertise needed to ensure compliance with evolving regulatory standards. In other cases, a service provider may decide to close its operations in a specific jurisdiction. Addressing these concerns with a new provider can help align services with your fund’s needs and goals.
Finally, there has been significant consolidation in the fund administration space with larger firms acquiring smaller fund administrators. Clients who originally decided to work with a particular firm may find that a change in the ownership of their fund administrator is out of alignment with their original goals and choose to re-open the vendor selection process to find another firm to work with.
Key Steps in the Transition Process
1. Evaluate Your Current Administrator
Start by assessing the quality of service, fees, and technology offered by your current provider. Review your Service Level Agreement (SLA) to understand your rights and obligations for terminating the contract, which typically requires a notice period of one to three months. It may also be that termination fees have been included in the SLA.
2. Define Your Needs and Goals
Identify where your current administrator is falling short and establish clear objectives for the switch, whether you seek enhanced technology, improved investor services, or a more tailored approach.
3. Perform Due Diligence and Risk Assessment on Potential Administrators
Research administrators with experience in similar funds and consult other service providers and stakeholders, such as lawyers, auditors, or directors, for recommendations. Conduct a comprehensive risk assessment of potential administrators, including checks on their client history, technology, and data security protocols. Reach out to their current clients for feedback, and if possible, visit the administrator’s office to meet the team and assess their capabilities firsthand.
4. Establish a Transition Plan
Work with both administrators to create a detailed transfer timeline that minimizes disruption. Typically, a 90-day notice is issued to the current provider. Collaborate closely to ensure a smooth handover of data, investor information, and financial records. Set a “go live” date when the new administrator officially takes over, and plan for a NAV testing phase to assess reporting systems, investor services, and communication channels before the transition is complete.
It often makes sense to time the transition around year-end to make the audit and tax return processes easier by working with books and records from a single provider. If you decide to make a change mid-year, be sure to consult with the audit/tax firm and agree on a plan for working with data provided by both administrators. It may be advisable to have the new administrator recreate the current administrator’s accounting and investor activity for the months before they take over so that the new administrator has a full year of data and can work with the audit/tax firm without the participation of the prior administrator.
5. Review and Finalize Contracts
Ensure transparency on fees and costs in the new contract, and carefully review the new SLA to align with your service delivery and compliance expectations. Confirm agreed timelines and assign key contacts who will manage your account. Consult with legal counsel to review all documentation, and work with the new administrator to update necessary documents with minimal cost.
6. Set Up Online Access, Fund Agreements, and Audit Readiness
Collaborate with the new administrator to establish online banking, prime brokerage, and trade blotter formats, ensuring smooth data transfer and access to essential systems. They will import and reconcile historical data, streamlining the audit process for greater efficiency.
Switching fund administrators often comes with some challenges, but with a well-structured plan, they can be addressed effectively, setting the stage for greater efficiency. Data migration, for example, requires precise protocols and a comprehensive list of all required data, including financial records and investor details, to ensure a seamless transition. Regulatory compliance is another critical focus – by selecting a new administrator with proven regulatory expertise, you reduce risk and stay ahead of industry requirements. Clear, proactive communication with investors is also essential, as it helps them feel informed and confident throughout the transition.
At Trident Trust, we specialize in seamless transitions for fund administration, ensuring minimal disruption to your fund’s operations. Our team offers expert guidance at every step, comprehensive services tailored to your fund, advanced technology for efficiency and security, and cross-jurisdictional support from financial centres worldwide.