Member Survey: Prepping For Dealer/Custodian Resignations

Is your firm prepared for an increase in dealer/custodian resignations?

As the DOL rule effective date looms closer, the industry as a whole is bracing for what many expect to be an increase in volume of “orphaned accounts.” Dealer and custodian resignations raise a number of potential issues and challenges for mutual fund complexes and their service providers.

NICSA recently conducted a survey of its membership to confirm the state of preparation for a rise in abandoned accounts. The results clearly indicate that the issue is a timely one.

The good news: We, as an industry, have begun to put our best people and best ideas forward to brace for this wave of operational challenges. And, among those that have begun in earnest to put pen to paper, there appears to be some consistency in process. The bad news: There’s plenty of work still to be done.

83% of NICSA survey participants have already begun receiving resignation requests from BDs and RIAs as broker/dealer of record on accounts.

And the vast majority are contemplating changing procedures to address non-brokered accounts in response to the DOL rule.

Yet, approximately 50% of respondents have not yet adopted formal written procedures.

Among the companies that participated were registered investment companies, their transfer agents, distributors, and operations/risk committees. Specific procedures vary from firm to firm but one constant remains. Companies expect, and are actively addressing, resignation requests by framing high level operational process flows.

Communication is Key

To guarantee a smooth transition of accounts between parties, funds and intermediaries must ensure critical communication is in place and that processes and procedures have begun to solidify. Communication among companies, as well as communication between fund providers and investors, should indeed be a focus for the financial services community.

Detailed results of this survey, on an anonymous basis, will be shared with participating firms. As we move toward clarity on the DOL rule and its impacts, we hope this information will help our members assess their own preparedness and examine their own internal policies relative to industry peers.

To help our membership explore this topic more fully, NICSA is preparing an exclusive white paper on the high level survey results. Look for this white paper on our website in the first quarter of 2017.

As always, we encourage our members to realize the full benefit of membership through participation in surveys such as this. One of the most important elements of communication just may be collaboration among peers. It brings us one step closer to building best practices on challenging issues.

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