Category: Financial Intermediary Administration, Industry Trends

Financial Intermediary Oversight: Progress, Challenges and Opportunities


financial-intermediaryadministration-survey-image_blogIn recent years, our industry has faced two constants – volatile markets and active regulators. While the equity markets are now up year-to-date, it has been a bumpy ride along the way. On the fixed income side, US Treasury yields are lower than a year ago and money market fund yields continue at historic lows. Alongside these market challenges, we have seen what feels like an acceleration of regulatory activity across multiple fronts, including SEC Money Market Reform, DOL Fiduciary Rule and FINRA actions against firms for improper application of sales charge waivers.

One area that is particularly challenging to fund companies is intermediary oversight. Recent SEC rulemaking and the concept release that accompanied the proposed Transfer Agent Rules demonstrate that the SEC is acutely aware of how the mutual fund industry has changed and the increased role that financial intermediaries play in shareholder servicing and transaction processing. However, funds are faced with an environment where the responsibilities for oversight of this activity are not clearly defined.

Boston Financial’s annual intermediary oversight survey can help by providing information about industry practices to support intermediary oversight. In the six years that we have conducted the survey, we’ve seen intermediary oversight programs evolve from the ground up. Today 91% of the fund companies have an intermediary oversight program in place.

The key findings from the 2016 survey are as follows:

  • Fund companies have made significant progress with their intermediary oversight programs as evidenced by the fact that nearly all have a program in place and satisfaction with the current program is on the rise. (61% are satisfied with their current program)
  • Asset managers continue to see legal/regulatory risk as the primary risk related to intermediary-based shareholder processing.
  • Fund board focus on intermediary oversight continues to increase, particularly around fund paid intermediary fees.
  • Fund boards have made headway on the implementation of the recommendations from the SEC’s guidance on distribution fees.

In spite of this progress, we see evidence of frustration around the lack of guidance from the regulators on intermediary oversight. While no one can predict when we will get clearer guidance, there are practical steps you can take. Whatever kind of intermediary oversight program you decide to implement, make sure you can document your program’s objectives and how you arrived at them. Document your process; record and maintain records for any issues uncovered and any actions taken. In this way, you can demonstrate that you “did what you said you were going to do.”

You can read more on the key findings from the survey here. Please feel free to reach out to me with any questions.


Ken Larsen

Ken Larsen

Ken is a Vice President at Boston Financial with responsibility for the strategy of the Financial Intermediary Administration (FIA) products and services. These offerings include a suite of tools designed to assist broker-dealer distributed fund companies in the oversight and servicing of their third-party relationships. The FIA team provides fund companies with innovative solutions and support to their financial intermediary, trust, and retirement business relationships. Ken's career in the transfer agent business spans the U.S., U.K., and European marketplaces. He began his career at Fidelity Investments in Boston. For the last 24 years, he has worked for several third-party transfer agents including Boston Financial, IFDS (UK), and State Street Bank Luxembourg in operational, management, relationship and product development roles. Ken received his Bachelor of Science degree from Providence College.

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