5 Best Practices for Onboarding a New Third Party Administrator

Onboarding a Third Party Administrator (“TPA”) is one of the most important projects that a Hedge Fund or Private Equity firm can undertake. Whether you are a new fund or you are switching to a new Administrator, your TPA will be a long-term partner and the strength of this relationship often begins with the onboarding process.  Issues with an Administrator can undermine your entire operation, as TPA’s are vital components of accounting, operations and investor relations processes. FinServ Consulting has on-boarded many TPA’s for our clients, and our experience has uncovered the following best practices for Hedge Funds and Private Equity Firms to consider when onboarding a new Administrator:

1) Rely on the RFP

The first step in any TPA onboarding process is to conduct a formal vendor selection based on a detailed Request for Proposal (RFP). The RFP is a very important document in the onboarding process, and a successful onboarding often follows a strong vendor selection process. The most robust RFPs break down a fund’s requirements into key areas and asks the Administrator to demonstrate how they will address these requirements. The RFP is a record of everything that the Administrator has promised and is a great reference for all parties during the onboarding.  Many firms hire consultants to create the RFP and conduct the Vendor Selection, as consultants can offer the perspective necessary to gauge the accuracy of responses and add valuable insight to the process. A well-structured procurement process offers numerous benefits as it helps establish expectations, leads to objective decision-making and frequently results in a lower price.

2) Dedicate Project Resources

Strong project management is a vital aspect of onboarding any Third Party Administrator. Project Plans, Status Reports and Issue Tracking are often the difference between a successful onboarding and an unsuccessful one. Dedicated project resources, whether they are internal or external, can help with project management, reconciliations, data gathering and any issues that arise during the onboarding. Often, the Administrator will provide their own integration resources; however, these resources are often reluctant to push internal resources, as they are eager to maintain the relationship. This reluctance can lead to increased conversion times and additional costs. Funds are wise to dedicate internal resources to the onboarding, and FinServ’s experienced team is always available to help.

3) Spend Time Negotiating the Service Level Agreement (SLA)

SLA’s lay out the framework in which the fund and the TPA operate. The on-boarding process should be viewed as a way to improve your firm’s key processes. The SLA is a great resource to document your internal processes and work with your TPA to improve them accordingly. Spend time negotiating the SLA and don’t be afraid to ask detailed questions such as where the work is being done, who will respond to questions after hours and the number of points of contact. In addition, ensure that you review and agree on the formatting of all deliverables in advance. Working with your Administrator to improve the SLA can help your firm achieve higher levels of operational and cost efficiencies.

4) Find a Great Team and Foster Collaboration

The strength of the Administrator relationship often comes down to the quality of the team working with your firm. Funds should demand to interview and approve the team prior to signing a contract. The names of the resources should be listed in the contract, and this team should preferably assist with the onboarding. Having permanent resources on your team from the start prevents issues with knowledge transfer and ensures everyone is on the same page.  In addition, creating a strong working relationship with your TPA is also of vital importance, and face-to-face contact is the best way to accomplish this. Organizing social events (or asking the Administrator to) and holding monthly on-site meetings, will go a long way to fostering collaboration and co-operation between teams.  In person meetings during the onboarding is also highly recommended.  When communication is limited to phone and email, the possibility of misunderstandings is much higher.

5) Don’t Make Assumptions

Administrators are often good at the complicated items but can struggle in areas that seem intuitive. Do not make assumptions about how the Administrator will handle something, even if it seems simple. This is especially true in a conversion. Just because your prior Administrator did something in a certain way; do not assume that the new Administrator will be able to replicate this. It is a best practice to assess all processes and get detailed demonstrations in advance. Items that need to be tweaked should be done so prior to signing on the dotted line. Funds all have unique processes and it is prudent to ensure that your Administrator will be able to handle even the smallest nuance.

FinServ’s Value When Onboarding a Third Party Administrator

FinServ Consulting is an industry leader in TPA Vendor Selections and onboarding and has advised numerous top Hedge Fund and Private Equity firms in selecting the right TPA. We have worked with all of the top tier Administrators and have insight into each TPAs’ Front, Middle and Back-Office functionality, as well as Investor Relations, Financial Reporting, Tax and other capabilities. Our team has the expertise to help your firm navigate the complicated TPA landscape.

To learn more about FinServ Consulting’s Third Party Administrator related services, please contact us at info@finservconsulting.com or (646) 603-3799.

About FinServ Consulting

FinServ Consulting is an independent experienced provider of business consulting, systems development and integration services to alternative asset managers, global banks and their service providers. Founded in 2005, FinServ delivers customized world-class business and IT consulting services for the front, middle and back office, providing managers with optimal and first-class operating environments to support all investment styles and future asset growth. The FinServ team brings a wealth of experience from working with the largest and most complex asset management firms and global banks in the world.


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