Monthly Archives: June 2016

Category: Blue Sky, Compliance

Managing Your Blue Sky Resources in Three Easy Steps


The question Boston Financial Blue Sky clients most frequently ask during their annual review is:

Is there anything further we can do to save on state Blue Sky fees?

Management of Blue Sky has become a greater priority for many fund families because states are increasingly changing their Blue Sky statutes and regulations in an effort to raise revenue. Altering these filing fees is attractive to states because (a) Blue Sky requires self-reporting by fund families, rather than state management of fees and (b) since the National Securities Markets Improvement Act of 1996, there is comparatively less oversight necessary.

final blue sky msfg3In 2009, Wisconsin drastically increased its fee range to notice file a single share class from $750 to $1,500 annually to $750 to $15,000 annually. These and other fee changes and policy interpretations can have significant impact on all fund families.

While state fees are fixed, there are steps fund families can take to lower their Blue Sky reportable transactions, which in turn, can help rein in expenses.

Step 1: Maximize Exemptions: Almost every state has a “sales to existing shareholders” exemption in their securities act. This exemption is valuable in the 21 states that base fees on reported transaction activity. For oversight purposes it is easiest to establish and maintain the exemption in a single location. A best practice is to set up the exemption on your Blue Sky service provider’s system. However, it can also be housed with your transfer agent or your brokers. Following initial implementation, you will want to review this exemption with the party where it is set up at least annually, and whenever you launch a new fund. The first step is to talk with your Blue Sky service provider about the best way to implement the exemption for your funds.


Step 2: Streamline Transaction Review: Step 2 is to establish policy and procedures for the review of Blue Sky transaction activity. These reviews can involve time consuming and costly interpretation of state statutes and regulations, potentially causing any monetary savings to disappear. Blue Sky transaction review policies and procedures can potentially save money for your firm.

One best practice option is to limit transaction reviews to those states that (a) base Blue Sky fees on reported transactions and (b) do not have a fee cap. At present, there are only five states that fit these criteria. In the states that do have fee caps, such as Louisiana and Montana, it is entirely possible that your Blue Sky provider could alert you to a multi-million dollar single transaction. But, because of fee caps, the associated state fee could be as low as $50.00, making the transaction review more costly than the fee itself.

As an alternative to a policy of not reviewing Blue Sky transactions in states with an annual fee cap, consider informing your Blue Sky provider that you would like them to include the state fee associated with any transactions sent to you for review. This will allow for a case-by-case determination of whether or not reviewing the transaction is of any financial benefit.

Step 3: Define and Communicate What You Will Review: Your transaction review policy and procedures should spell out criteria that help your Blue Sky provider know what activity to send to your firm for review. Communicate these criteria to your provider, and plan to review them annually.

final blue sky msfg4Another option, to be used alone or in conjunction with an excess transaction rule, is to tell your Blue Sky provider you want to review transaction activity when they suggest an amendment with a fee in excess of a certain dollar amount (e.g., $1,000 or $10,000), dependent on the typical activity of your funds. Your Blue Sky provider can assist in determining a reasonable dollar amount by reviewing prior amendments. It is important to note that your Blue Sky provider should always be informing you of excess transactions on permits, particularly when penalty fees are involved, because frequent excess transactions could be a sign that a change is needed in your fund monitoring criteria.

Consistent implementation and clear communication are the keys to effectively managing Blue Sky fees. Make sure you and your Blue Sky provider are leveraging technology to maximize exemptions, and have clear rules about transaction review to reduce time spent on transaction activity that may not necessarily translate into savings for your firm.

This article was originally seen in the 2016 Mutual Fund Service Guide, reprinted with the permission of SourceMedia.



Category: Blue Sky, Compliance, Conferences and Events

It’s Complicated…


No, that’s not my current Facebook status, but it could reflect the status of the Blue Sky compliance environment today.Blue Sky post (1) This was one of the themes at the inaugural Blue Sky Client Roundtable hosted at Boston Financial in April. At this event 25 representatives from 20 different client firms discussed the intricacies of managing a Blue Sky program, and best practices for navigating the filing and sales reporting process.


We know our clients have major questions about Blue Sky compliance, dominated by a concern about the vast unknowns that often surround their work. This may be the result of

  • Loss of in-house expertise as the industry has shifted to full service outsourcing of the Blue Sky functions.
  • Assignment of Blue Sky oversight responsibility to people who may not have state compliance experience.
  • Shifting nature of Blue Sky laws within the 53 states and territories that require Blue Sky notice filings.

Management of Blue Sky is complicated

So, taking a page out of Boston Financial’s Client Forum and CCO Forum, the Blue Sky Administration team made the decision to create a professional community exclusively for our Blue Sky clients.

The community will feature:

  • In-person events like the Roundtable.
  • Virtual learning and networking opportunities.
  • Core education for Blue Sky oversight staff on Blue Sky processes and Boston Financial’s management of their programs.

It will also be a place where clients can discuss cutting edge themes in the industry, and safely exchange ideas and build on the experiences of each other so they can stay ahead of the regulatory curve.

Case in point:

Just days before the Boston Financial Blue Sky Roundtable, I attended a meeting for the ICI Blue Sky Subcommittee in Washington DC, where we discussed whether funds are correctly reporting the required sales amounts to the states using all exemptions available.

At the Roundtable, we shared the themes from this ICI dialogue, and introduced the participants to the best practices we use in managing sales reporting and exemptions; an exemption decision workflow was distributed to help clients manage their responsibility for exemption processing. During the afternoon panel discussion about sales reporting and an open Q&A session at the end of the day, Roundtable participants shared their thoughts and experiences improving data used to make exemption decisions.

Blue Sky post(2)

During the April 2016 ICI Blue Sky Subcommittee meeting, we also discussed whether or not states were becoming more aggressive in their enforcement of Blue Sky. Within a month, we released notifications via our secure client extranet site, of two more states amending their Blue Sky regulations to increase fees. This brings the number of states making changes to their fees to four in just the past 12 months.

As the event came to a close, one Blue Sky Roundtable participant expressed what many were thinking:

It (is) great having other Boston Financial clients to discuss Blue Sky best practices with, and also just to have a general understanding of how different companies handle their Blue Sky needs compared to our company.

Management of Blue Sky is complicated. This is why we are building a client community that features events like the Blue Sky Roundtable, where we can educate clients, provide guidance and best practices, and together explore strategies for meeting evolving compliance needs.

Category: Creating Future Value, Industry Trends, Technology

Are You Falling Behind in the Digital Age? What it Takes to Deliver Exceptional Customer Experiences


To remain relevant, firms must be attuned to their customers’ expectations, behaviors, and needs. They need to be in lockstep with the customer experience. But the customer experience is undergoing a radical transformation, largely driven by the digital and mobile age. Today’s digitally connected customer dictates the research and buying process with ever increasing expectations.

Asset managers who successfully develop a clearly defined, cohesive digital strategy― one that is integrated with their overall business strategy― will keep pace with their customers’ expectations, improve customer satisfaction, and ultimately drive their business forward.





The Headwinds You May Face

Investors’ expectations are dramatically increasing largely due to their interactions elsewhere. Think Amazon, Netflix, and Airbnb. As a result, today’s investors expect their online experiences to be fast, secure, and personalized. To say the bar has been set high for asset managers is an understatement.

Adding to the challenge is the “bleeding” of customers’ expectations. When it comes to interacting with your company online, customers only see one brand; however, their experiences of your brand cuts across multiple touch points within your firm. Experiences and influences elsewhere― outside your ecosystem, are also influencing and comingling with your investor’s expectations. With investors’ expectations continually evolving, it’s hard to keep pace.

Lastly, because of our heavily regulated industry, our online playing field is quite different than other industries. Regulatory constraints can impede the customer experience. Whether it’s the need for paper forms and medallion guarantees or additional documentation for certain requests, our highly-regulated industry can make it hard for investors to do business with us in the digital age.

What It Takes to Succeed

The customer experience spans a spectrum of touch points requiring you to view them holistically. Hence, your digital strategy must be part of your organization’s overall business strategy and not viewed as an afterthought or fringe business activity created in a vacuum. In many cases, the digital strategy is set first and then items such as print, e-mail, and other media outreach are based upon that lead strategy.

There also must be continuous investment in your digital strategy versus budgeting it as a one-time project or an activity with a finite life. Companies who budget for improvements annually will stay ahead of the curve and avoid chasing others in the industry.

MFSG image 2






Related: Watch this video to learn what else makes for a winning website as Jackie Norbett, senior reporter for Ignites, interviews Brian at the ICI General Membership Meeting. Digital access to Ignites requires a subscription.

Where are the Opportunities?

As part of our E-Business engagement with clients, we see tremendous opportunity for asset managers to showcase their brand in the digital space. Not only does brand perception improve, but there are also many indirect revenue and expense implications. Here is what we see as the top five areas of opportunity for asset managers:

Online Bank Verification: Being able to complete anything online is a growing expectation among customers. With online bank verification, shareholders are able to link bank and mutual fund accounts together without the need to sign and mail forms. Firms would take a potentially arduous customer experience and make it fast and effortless.

User Preferences, Views, and Customization: Enabling customers to personalize their online experience is now the norm. Financial sites like Mint and Prosper allow customers to tailor their financial “picture” and receive customized savings tips. Some asset managers now allow their customers to “slice and dice” their portfolio view and highlight alternative savings options tailored to the customer’s preferences. Not providing customization capabilities presents investors with a noticeable imbalance of customer experience, which could lead to an unhappy customer experience.

Authentication: Enhancing login security and expanding authentication to other devices, shareholders gain an extra layer of security. For instance, a firm may have an online redemption limit of $100K/day; however, the shareholder attempts a higher redemption amount. This action triggers a text to the shareholder’s phone with an authorization code. More advanced authentication could also reduce or eliminate the 15-30 day hold periods, which typically occur when shareholders update their address.

Analytics: Using data to make intelligent automated marketing decisions about what to display and to who allows firms to cater to their customers’ individual needs.

Content Management Solutions: Enabling fund companies to control messaging, campaigns, and more from a web interface, rather than requiring technical resources.

Today’s investors expect a positive, seamless, consistent, personalized online experience with their financial services provider. For firms seeking to keep pace with their digitally connected customer, it can be challenging; however, there is real danger by moving in the wrong direction or not moving forward at all. Let our E-Business team of consultants, designers, and developers help you create exceptional customer experiences.

This article, co-authored by Andy Jordan, Vice President of Financial Services Product Strategy for DST Systems, Inc., was originally published in the 2016 Mutual Fund Service Guide and is reprinted with the permission of SourceMedia.