While other vendors at the ICI's annual meeting in Washington, D.C. gave out pens, t-shirts and bags, a vendor in a strategic corner booth encouraged attendees to step up to a slot machine for a chance at winning a Mercedes Benz.

In keeping with that attention-grabbing strategy, that same vendor also launched a million dollar campaign, literally. Tustin, California-based Envision Financial Systems bet fund decision makers a cool million that they would be satisfied with a switch to Envision for transfer agent services. Envision named the campaign the "PowerAgent Million Dollar Challenge."

Although their marketing efforts might appear a bit flashy, the company is hardly a flash in the pan. The shareholder services and transfer agent software provider, which opened their doors in 1997, currently serves 29 clients with a total of four million shareholder accounts, said Edward Yang, marketing manager for Envision.

One Challenger's Key Hire

Citing "explosive growth," the company announced the addition of a key business development hire and three others on July 26.

Former Federated Investors executive Brian Jones joined Envision as vice president of strategic business development. Jones' job will be to focus on winning business from fund companies with a top 20 place in terms of assets under management.

Also in late July, Envision hired Linda Lawson as director of transfer agency compliance and two client services and support staff.

Envision hopes to leverage Jones' industry contacts to target large fund firms, said Yang. Jones, who prior to Federated worked at Fidelity Investments for 16 years, will conduct an outreach in September and October, said Yang.

The hire marks a shift in the strategy for the firm -- from serving small and mid-sized fund firms to the largest firms, said Yang. Currently, the largest client that Envision serves is Rydex Investments, with approximately one million subaccounts, said Yang. Another unnamed client on par with Rydex is being currently converted, said Yang.

How does Envision plan on winning these larger fund firm accounts? Yang maintains that larger fund companies have been the ones knocking on Envision's door, seeking the flexibility and customization available with client-server-based products.

"Rydex came to us because there was just no way that DST could do what they wanted," commented Yang. He estimated that the asked-for changes would have cost Rydex $30 million with DST.

Up Against the Mainframes...and Others

DST is not the only provider using mainframe-based technology. Transfer agency heavyweights DST, PFPC and Sungard all have mainframe-based platforms. While DST and PFPC also offer full transfer agent services, Sungard only provides a platform. Full-service transfer agent providers BISYS and Boston Financial use Sungard and DST platforms, respectively.

Other upstarts using client-server technology include Global Investment Systems and Phoenix Investment Partners.

Fellow challenger GIS is also pursuing a larger firm strategy. GIS recently added two senior business development hires in June. Joyce Karpel joins GIS from Mobius Management Systems; David Scheuring from ADP.

Concurrent with the hiring, GIS also reorganized their sales force along the lines of hunters and gatherers, with Karpel and Scheuring in the latter category. The three hunters are responsible for building new customer business within a focused territory, while three farmers "farm" the existing client base for additional services, said Mary Pizzichino, director of US sales and marketing for GIS. Karpel and Scheuring will together cover one-third of the U.S. and Caribbean region.

With the help of Karpel and Scheuring, GIS plans on moving its target for its MSHARE product farther upstream to middle- and top-tier mutual fund clients. GIS currently focuses on smaller fund companies with its MFACT product; MSHARE is GIS' fund accounting and administration software for funds with 250,000 and more shareholder accounts. Pizzichino characterized the MSHARE product as a ten fund family and under product, and MSHARE as a 100 to 500 fund family product.

GIS' new initiatives do not mean that it is abandoning the small-end of the market, said Pizzichino. She described the segment as still having "a lot of benefits," and "room to grow."

Who's Winning?

Despite the efforts of the startups, it appears that large fund companies remain interested in what the dominant players have to offer. DST, in a recent second quarter earnings call, announced that it had won two contracts totaling a whopping 5.5 million shareholder accounts, increasing total accounts (90.8 million) serviced by the company by six percent.

A DST spokesperson was unable to arrange for comment before deadline.

Eyes on the Prize
TA Platform & Service Providers	Shareholder Accounts (mil)
DST Systems	90.8
PFPC	21.0
Sungard	11.5
BISYS	2.2
Envision	4.0
Source: DST, PFPC Q2 earnings; conversations with BISYS, Envision and Sungard

Tom McDonnell, president and chief executive officer of DST, also noted that the company was in hot pursuit of 15 contracts worth 17 to 19 million shareholder accounts, an average of 1.1 to 1.3 million accounts per contract.

PFPC Chief Financial Officer William Demchak was a bit more vague in the company's second quarter earnings call: "[w]hile pricing pressure and mutual fund industry turmoil continued to impact this business, we continue to take out expenses and we’ve won some valuable new clients. In fact sales for the first half of ‘04 have already surpassed sales for all of 2003."

PFPC also landed the $7 billion GE mutual fund family effective September 18, GE Asset Management disclosed in a SEC filing. A PFPC spokesperson declined to comment.

Sungard, meanwhile, is conducting an internal review of its transfer agent platform, InveststarOne, said Sungard Investor Accounting Systems President Ken Kempf. Kempf said Sungard is examining the infrastructure of their technology and looking into shortening segments of their development cycle.

Sungard is conducting the review in the context of developing a global InvestarOne system, said Kempf. "There is a clear market for a global system. If you're going to have global market, the product has to be somewhat portable," added Kempf.

Kempf characterized the internal review as being in the latter part of the initial stage, with completion two to three years in the future.

As a provider not wedded to any specific technology, BISYS may be well-positioned to benefit from the changes.

"We're not married to a system…we're going to pick what we think works best," said Alan Collins, vice president of BISYS' Transfer Agency Operations. Collins added that BISYS has been using Sungard's platform for most of the time that the company has offered transfer agency services.

Dana Donahue, senior vice president of Transfer Agency Operations, commented that BISYS is "very comfortable" with Sungard, but that it conducts a technology review every two to three years.

Up Ahead

Currently Envision trails DST by 86.8 million shareholder accounts and PFPC by 17 million shareholder accounts. Approximately 11.7 shareholders are on the Sungard platform, with BISYS serving 2.2 million shareholders. A GIS spokeswoman declined to comment on the number of shareholders they serve.

A good indicator of the trend in fund shareholder services may be how many of the 15 contracts that DST lands by the end of year. McDonnell predicted that half of the proposals may be decided by the end of the year. Stay tuned...  

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