Chapter 16
Applications, Transfers, and Other Useful Forms
In This Chapter
Explaining application basics
Understanding nonretirement and retirement account forms
Establishing an automatic investment program
Asking for help
When you invest money, completing forms is unfortunately a requirement. But don’t despair. If you truly detest paperwork and mailing things, you’ll be happy to know that you can now complete many application forms online. In this chapter, I explain how to fill out fund application and transfer forms.
Although the subject of this chapter may seem mundane, I explain some extra-nifty things that perhaps you didn’t know you could do with fund investing. And, unlike dealing with IRS tax forms year after year, fund paperwork isn’t unpleasant to deal with. You won’t have much (if any) ongoing paperwork to do, except for filing the taxes owed on mutual fund distributions held outside of retirement accounts (the subject of Chapter 18).
Taking the Nonretirement Account Route
As I discuss in Chapter 9, you can purchase most of the excellent mutual funds that I recommend in this book either directly from the mutual fund company responsible for them or through a discount brokerage firm. Though you see many similarities between mutual fund company and discount broker applications, you also see that brokerage account applications are a different type of animal than mutual fund company applications. I show you how to handle both in this chapter.
Filling in the blanks: Application basics
In years past, prospective customers called the fund company on its toll-free number and said, “Please send me your account application materials for your (fill-in-the blank) fund.” Several days later, a packet arrived in the mailbox with enough density and heft to make a great flyswatter! Most of the content was marketing propaganda to convince people to send gobs of money. You had to hunt around for the document that said something like Account Registration Form or New Account Application or Application.
Thanks to the Internet, now you can open fund accounts online. In the past, although various fund companies allowed you to access and download account application forms on their Web sites, you still had to print the application, sign it, and drop it in the mail. But today, electronic signatures exist. E-signatures, as they’re commonly referred to, are now legally equal to traditional pen-and-ink signatures on paper forms. You don’t literally sign a form using your computer; you’re simply assigned a code that serves as your very own e-signature. Fund companies ensure your account’s security by requiring your Web browser to use sophisticated encryption technology and by mailing another code to the address that you provide in your application.
Here are the potential benefits of completing an account application online:
You can get your new account open much faster, which may come in handy when you face a deadline for opening a particular type of account (such as a retirement account).
You can save time completing forms through the same company. Most of the better fund-company Web sites remember your information when you’ve completed one form, which allows them to precomplete common portions of new forms when you come back to open more new accounts.
The following sections explain and show you how to complete the important portions of a typical new account application for a nonretirement account (I discuss the nuances of retirement account applications later in the chapter).
Account registration
In the account registration section (which usually comes first on an account application), you’re asked to choose the appropriate box and enter the name of the individual or organization that’s registering the account. Here are the common types of account registrations:
Individual or Joint Account: Choose this option if you’re opening the account for yourself or jointly for yourself and someone else. Joint tenants with rights of survivorship is generally the default classification for jointly registered accounts and establishes the following conditions:
• The person you’ve jointly registered the account with can do everything that you can do on the account, such as calling and inquiring about account balances, performing transactions, and writing checks. Neither party needs the other’s permission (although it’s possible to establish the account so that both signatures are required for check writing).
• Each account holder has an equal interest in the account.
• If you should die, the entire account balance goes to the other person registered on the account without the hassles and expense of going through probate.
A rarely used option is to register the account as tenants in common. To arrange a tenancy in common, you can have a legal document drawn up specifying that each tenant owns a certain percentage of the account. Unlike shares of ownership for joint tenants with rights of survivorship, the shares for tenants in common need not be equal. If you die, the account is restricted; your share of the account is distributed to the person whom you designated to receive it, and the surviving account holder is required to set up a new account for his share.
If you go to the trouble of setting up the account registration as tenants in common, just write in the margin in this section of the form that you want the account set up this way or attach a short letter that presents the same request. The fund company doesn’t want or need to see the legal document (which you should keep with your will) or other important personal financial documents.
Gift or Transfer to Minor: Use this section if you want to open (register) an account in your child’s name. As the parent, you’re the custodian, your child the minor. Your state’s name is requested in this section because two different sets of laws govern custodial accounts: the Uniform Gift to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA). States allow one or the other. Your child is legally entitled to the money in the account when she reaches the so-called age of majority (which is, depending on the state, between 18 and 21). Read Chapter 3 before putting money into an account in your child’s name because there are drawbacks.
Trust: Generally, you know if you have a trust because you’re either the one who sets it up or you’re the recipient of assets that are part of a trust. There are many types of trusts. For example, some folks, by the time they get older, have set up a living trust that allows their assets to pass directly to heirs without going through probate. If you have a trust agreement, provide the pertinent details at this point in the form.
Corporation, Partnership, or Other Entity: If you want to open a mutual fund account for your corporation or local Rotary Club, use this section. You need a taxpayer ID number. If your organization doesn’t have one, call the IRS at 800-829-3676 (800-TAX-FORM) and request Form SS-4, or visit its Web site at www.irs.gov.
Your personal information
This part’s easy. You may be wondering why some fund companies ask for your phone numbers, the name of your employer, and your occupation. The company wants your phone numbers so it can call you regarding account issues. The rest of this information is partly required by fund regulators and partly just desired by the fund company for its own market research; it wants to know about the people who invest in each of its specific types of funds. If you want to maintain your privacy, you can skip the employment stuff, and the fund company will still happily open your account.
Your investment
The investment section is where you tell ’em which fund you want. But be careful in this section. Most account applications offer a menu of fund choices, so you need to double-check that you’ve selected the fund that you have your heart set on.
To ensure that the money is deposited into the correct fund, check the account statement that you receive when you open your account. Although it doesn’t happen often, fund companies (and you!) occasionally make mistakes.
Your method of payment
After you open an account, you’re faced with the task of getting money into your new account in order to buy some mutual funds. You can put money into your account by mailing the fund company a check, having funds electronically transferred from an existing bank account, or transferring funds from an account you previously opened at the fund company.
Generally, you need to send a check to open a mutual fund account. If this is the case, make the check payable to the fund (if the company numbers its funds, include the fund number next to the fund company name). Don’t worry about someone stealing the check or a mail thief cashing it (remember that you make the check payable to the fund).
After you open a money market fund account, you can do exchanges into other accounts by telephone. Exchanges save you the hassle of filling out more application forms every time you open new funds at the same company (although different account types, such as IRAs, do require separate account applications). Make sure that you have another source of cash during the time it takes for the fund company to open your money fund and send your first check. Sometimes people send in almost all their money and then, in a few days, they wish that they’d kept some back.
Dividend and capital gains payment options
Most mutual funds make dividend and capital gains payments. If you’re not living off this income, it’s usually best to reinvest these payments by purchasing more shares in the fund. To reinvest, just check the box indicating that you want to have the fund’s dividend and capital gains reinvested. This strategy eliminates the hassle of receiving and cashing checks often and then figuring out where to invest the money (but it doesn’t change the taxability of a fund’s distributions).
On the other hand, if you’re retired, for example, you may want the distributions on your fund sent to you so that you can spend it on early-bird restaurant specials. Most fund companies offer you the option of having the money from distributions sent to you as a check through the mail. Or, even better, the fund can electronically transfer the money to your bank account. This method gets you the money quicker and requires less mail to open and fewer checks to sign and schlep to the bank.
Wiring and automatic investment options
You’re not required to have wiring and automatic investment options on an account. Wire redemption allows you to request that money be wired to your bank account. Use this feature if you might unexpectedly need money fast. Your mutual fund and your bank may charge for wiring services, though, so don’t use wiring as your regular way to move money to and from your bank.
If you want to make regular deposits into one of your fund accounts, you can select an automatic investment plan, which authorizes the fund to instruct your bank to send a fixed amount on a particular day of the month (or some other time period). You can do the same in reverse by withdrawing money on a regular schedule, too. The minimum amount should be stated on the form.
Special purchases and redemptions is an electronic funds transfer — it’s like a paperless, electronic check that allows you to move money back and forth between your bank and mutual fund accounts. This process usually takes a full two days to complete because, like a check, the transaction is cleared through the Automated Clearing House (wiring can typically be done the same day or next day). The fund and the bank shouldn’t charge for the service because it’s just like a check (which means that it costs less than wiring).
To establish these additional services, remember to attach a preprinted deposit slip or blank check (write “VOID” in large letters across the front of the check so that no one else can use it).
Check-writing option
Check writing is a useful feature to sign up for on a money market fund. But most money funds limit check writing to amounts of $250 or more.
I don’t recommend establishing check writing for bond funds because each time you write a check on a bond fund, you must report the transaction on your annual tax return (because the price of the bond fund fluctuates, you’ll be selling at different prices than you bought). Keep enough cash in your money fund and write your checks from there.
Buying in to discount brokerage accounts
As I discuss in Chapter 9, discount brokerage firms and the discount brokerage divisions of fund companies offer you the opportunity, through a single account, to invest in hundreds of funds from many fund companies. Brokerage firms are different from mutual fund companies. The first difference is that brokerage accounts allow you to hold and trade individual securities, such as stocks and bonds. This feature is handy if you hold individual securities and want them in the same account as your mutual fund.
Another difference is that, in addition to offering mutual funds, brokerage accounts allow you to invest in riskier types of securities and engage in riskier investing strategies. Many brokerage firms, for example, allow investing in options (see Chapter 1), which are volatile, short-term, gambling-type instruments. Keep your distance.
Most of the sections on a typical brokerage application are the same as those on a mutual fund application, which I describe in the “Filling in the blanks: Application basics” section, earlier in the chapter. The following sections explain the main differences that may give you cause for pause.
Borrowing money so you can invest: Margin accounts
Brokers offer (and sometimes encourage) margin trading. Just as you can purchase a home and borrow some money to finance the purchase when you can’t afford to pay all cash, you can do the same with your investments. When you buy a home, most banks require that you make a 10 to 20 percent down payment on the purchase price. When you invest in a brokerage account, you need to make a 50 percent down payment.
Buying investments on margin isn’t something I recommend because
You pay interest. Although the rate is competitive — nothing approaching the worst credit cards — it still isn’t cheap. Typically, the rate is a bit more than you’d pay on a fixed-rate mortgage on your home.
If your investments fall significantly in value (25 to 30 percent), you get a margin call, which means that you need to add more cash to your account. If you can’t or don’t add more money to your account, you must sell some investments to raise the cash. Of course, if your securities’ prices increase in value, you earn money not only on the down payment you invested but also on the borrowed money invested. (That’s called leverage.)
You can’t invest on margin in retirement accounts, which is where you should be doing most of your investing (because of the tax benefits).
Borrowing on margin can be useful as a short-term source of money. Suppose you need more short-term cash than you have in a money fund. Instead of selling your investments, just borrow against them with a margin loan. This move makes sense especially if you’d have to pay a lot of tax on profits were you to sell appreciated investments.
Getting personal
Brokerage applications ask for financial information that most people consider to be confidential, such as your driver’s license number, income, and net worth. “Why,” you may rightfully ask, “are they being so nosy? Do they really need to know this stuff?”
All brokerage firms ask for this kind of information (although different firms ask different questions) because of the so-called know-your-customer rule imposed by regulators. Because brokerage accounts allow you to do some risky stuff, regulators believe that brokerage firms should make at least a modest effort to determine whether their clients know enough and have a sufficient financial cushion to make riskier financial investments.
Make your paperwork go faster and your investing less dangerous and skip this! If you’re not signing up for the risky account features, such as margin and options trading, the brokerage firm doesn’t need to know this info.
Accessing your cash: Checks and debit cards
Some brokerage accounts offer additional features, such as check writing and a debit card, that allow more convenient ways for you to access the money in your account. The only challenge is that you may have to request a different application for the special type of account that offers these features.
Debit cards look just like credit cards and are accepted by retailers the same way as credit cards. But, when you use your debit card, the money is generally sucked out of your account within a day or two. Using debit cards instead of credit cards may simplify your financial life by saving you from writing a check every month to pay your credit card bill. However, you give up the float — the free use, until the credit card bill is due, of the money that you owe — because debit cards quickly deduct the money owed from your account. You may also use your debit card to obtain cash from ATMs.
As with a money market mutual fund account, you may obtain checks to write against the money market fund balance in your brokerage account. Don’t forget to complete the signature card for check writing.
Some brokerage accounts come with even more features that make organizing your finances easier, such as unlimited check writing and a bill payment service. These services cost more money, and you may have to put more money into your account, pay a monthly service fee, and/or pay an annual account fee if you don’t place a specified minimum number of trades per year.
Transferring your dough into a new brokerage account
You may have cash, securities, and most mutual funds transferred into a new brokerage account that you establish. (If you haven’t opened an account yet, you also need to complete an account application form.) All you need is an account transfer form for the brokerage firm into which you’re transferring the assets. Using one of these forms saves you the hassle of contacting brokerage firms, banks, and other mutual fund companies from which you want to move your money. Using this form also saves you the bother and risk of taking possession of these assets. The following sections contain the info you need to know to complete a typical brokerage account transfer form.
Information about your (new) brokerage account
Your new brokerage firm needs to know into which account you want your assets transferred, so in this section you fill in your name as you have it on your account application or as it’s currently listed on your account, if it’s already open. If you’re sending your account application with this transfer form, you won’t have an account number yet, so just write NEW in the space for your account number.
Information about the account you’re transferring
Here, you write the name of the brokerage, bank, or fund company that holds the assets you want to transfer and enter the account number of your account there. You may see the phrase Title of account; this simply means your name as it appears on the account you’re transferring.
Brokerage account transfers
In this section, you indicate whether you want to transfer your entire brokerage account — which makes your administrative life easier by eliminating an account — or only a part of it. (Another advantage of closing accounts at firms such as Prudential, Merrill Lynch, and so on is that they generally charge an annual account fee.)
If you’re doing a partial transfer, you generally just list the assets that you want to transfer — for example, IBM stock — and the number of shares, such as “50” or “All.” With partial transfers that include the transfer of mutual funds, you may have to go through the hassle of completing a transfer form for each company whose funds you’re moving. You may have to list these funds in a separate section.
You generally won’t be able to transfer (into your new brokerage account) mutual funds that are unique (or proprietary) to the brokerage firm you’re leaving. Funds that can’t be transferred typically include funds such as Prudential, Merrill Lynch, and so on. If there are no adverse tax consequences, you’re better off selling these funds and transferring the cash proceeds. Check out Chapter 17, which walks you through the issues to consider if you’re debating whether to hold or sell a fund.
If you bought some of those awful limited partnerships, check with the discount brokerage firm to which you’re transferring your account to see if it’ll be able to hold them. Discounters will likely charge you a fee ($25 to $50) to hold LPs, but many of the lousy firms that sold them to you in the first place also charge you for the privilege of keeping your account open with them. If the costs are about the same, I’d move the LPs to your new account to cut down on account clutter. Another alternative is to speak with the branch manager of the firm that sold them to you and ask that it waives the annual account fee for continuing to hold your LPs there.
Mutual fund transfer forms
As I explain in the last section, you can only transfer certain companies’ funds into a brokerage account. For each fund you’re transferring, you typically list the fund name, your account number, and the amount of shares you want transferred or sold.
If you’re transferring the fund as is instead of selling it, tell the new firm whether you want the fund’s dividends and capital gains distributions reinvested. Unless you need this money to live on, I’d reinvest it.
Bank, savings and loan, or credit union transfers
A potential complication occurs when you’re transferring money from a certificate of deposit. In that case, send in this form several weeks before the CD is set to mature.
If you’re like most people and do things at the last minute, you may not think about transferring a CD until the bank notifies you by mail days before it’s due to mature. Here’s a simple way around your inability to get the transfer paperwork in on time: Instruct your bank to place the proceeds from the CD into a money market or savings account when the CD matures. Then you can have the proceeds from the CD transferred whenever you like.
Attach your account statement!
Don’t forget to attach a copy of a recent statement of the account you’re transferring as well as your account application if you haven’t previously opened an account. At this point . . . you’re done! Mail the completed application in the company’s postage-paid envelope, and the transfer should go smoothly. If you have problems, see Chapter 19 for solutions.
Preparing for Leisure: Retirement Accounts
The applications for retirement accounts pose new challenges. But, remember that it will be worth the effort: Otherwise, how will you pay for dentures and your annual AARP membership? The first part of these applications is just like a nonretirement account application, except that it’s easier to fill out. Retirement accounts are only registered in one person’s name: You can’t have jointly registered retirement accounts. Because mutual fund company retirement account forms are so similar to brokerage account retirement forms, I cover only the differences here.
Retirement account applications
Individual Retirement Accounts (IRAs) are among the most common accounts you may use at a mutual fund company. This section explains what you need to know to complete an IRA application. I also discuss the unique features of the other common retirement accounts — SEP-IRAs and Keoghs, which are used for the self-employed and small business owners. (For a detailed explanation of the various types of retirement accounts, see Chapter 3.)
If you plan to transfer money from a retirement account held elsewhere into the one you’re opening, before you start, pay attention to two details:
Make sure that the retirement account type you’re opening (such as a SEP-IRA) matches the type you’re transferring from (unless you’re moving money from a 401(k) plan, in which case you’d be sending that money into an IRA because you can’t open a 401(k) as an individual).
If you want to transfer individual securities from a brokerage account, you need a brokerage account application for the type of retirement account you’re opening, not a mutual fund account application.
Register for an account
Account registration is an easy section to fill out — but make sure that, if you’re transferring IRA money from another firm into your mutual fund IRA, you list your name exactly as it appears on the account you’re transferring. Otherwise, the firm that has your IRA may make a fuss, causing delays and making you complete yet more forms. Note: Some applications ask for your employer info. You don’t have to provide this if you don’t want to.
Choose your investment method
With an IRA, you can fund your account through three methods:
Annual contribution: Select this option if you’re opening up a new IRA with money previously held outside any kind of retirement account. You must specify which kind of fund(s) you want to buy, how much you’ll be contributing (in 2010, up to $5,000; $6,000 if you’re age 50 and older), which kind of IRA you want to open (traditional or Roth), and which tax year you’re making your contributions. You have until the time you file your tax return (the deadline is April 15) to make a contribution for the previous year.
Transfer from an existing IRA: If you want to move an IRA from another investment firm or bank into your new mutual fund IRA, select this option. You also need to complete an IRA transfer form (which I explain in the “What to do before transferring accounts” section). This option is the best way to move an existing IRA because it presents the least hassle and the fewest possibilities of a tax screw-up.
Rollovers: Withdrawing the money from another IRA and sending it yourself to the new account isn’t a good way to transfer your IRA. The big danger is that if you don’t get the funds back into the new account within 60 days, you’ll owe megataxes (income tax plus penalties).
If you’re rolling over money from an employer-sponsored plan, such as a 401(k), you can select the option that’s labeled something like Traditional Rollover IRA. Tax advisers usually recommend that money coming from your employer’s plan should go into a rollover account. This choice allows you to someday transfer the money back into another employer’s plan. Of course, you can choose investments in your IRA, so this may sound like a silly reason to use a rollover IRA. An advantage to establishing a contributory IRA, instead, is that you can add to it with future IRA contributions. You can also merge it with other IRAs.
Don’t request that your employer issue you a check because your employer must withhold 20 percent for taxes. If you want to roll the full amount over — a wise move — you must come up with the missing 20 percent when you deposit the money into your IRA. Otherwise, you owe tax and penalties on it. Establish your IRA and then instruct your employer to send your money directly to that account.
Select your account service options
Most companies allow you to pick and choose from various service options that come with your IRA. Some of them, such as telephone/computer exchange, are automatically available with your account unless you specify otherwise. You can usually also set up an automatic investment plan; contributions to your IRA can be regularly deducted from either your bank checking account or your paycheck itself. Such plans generally have lower minimum initial investment requirements.
Designate your beneficiaries
In the beneficiaries section, you specify who gets all this retirement money if you work yourself into an early grave or haven’t spent all of it by the time you go. In most cases, people name their spouses, kids, parents, or siblings. You may also list organizations such as charities that you want to receive some of your money; providing their tax identification number and address is a good idea (just include this info on a separate piece of paper).
If your children are under 18, they don’t have access to the money. A guardian who you identify through your will controls the money. If you die without a will, the courts will assign a guardian. Your primary beneficiaries are first in line for the money, but if they’ve all crossed the finish line by the time you do, your contingent beneficiaries receive the money.
What to do before transferring accounts
If you have money in a retirement account in a bank, brokerage firm, other mutual fund company, or in a previous employer’s retirement plan, you can transfer it to the mutual fund(s) of your choice. Here’s a list of steps for transferring a retirement account. Note: If you’re doing a rollover from an employer plan, please heed the differences indicated:
1. Decide where you want to move the account.
See Chapter 9 for help with this decision.
2. Obtain an account application and asset transfer form.
Call the toll-free number of the firm you’re transferring the money to (or visit its Web site) and ask for an account application and asset transfer form for the type of account you’re transferring to — for example, an IRA, SEP-IRA, Keogh, or 403(b).
You can tell which account type you currently have by looking at a recent account statement; the account type is given near the top of the form or in the section with your name and address. If you can’t figure it out on a cryptic statement, call the firm that currently holds the account and ask a representative which type of account you have (just be sure to have your account number handy when you call).
3. Figure out which securities you want to transfer and which you need to liquidate.
Transferring existing investments in your account to a new investment firm can cause glitches because not all securities may be transferable. If you’re transferring cash (money market assets) or securities that trade on any of the major stock exchanges, transferring isn’t a problem.
If you own publicly traded securities, it’s often better to transfer them as is to your new investment firm, especially if the new firm offers discount brokerage services. (The alternative is to sell them through the firm you’re leaving, which may cost you more.)
If you own mutual funds unique to the institution you’re leaving, check with your new firm to see whether it can accept them. If not, you need to contact the firm that currently holds them to sell them.
4. (Optional) Let the firm from which you’re transferring the money know that you’re doing so.
(You don’t need to worry about this step if you’re rolling money out of an employer plan.) If the place you’re transferring from doesn’t assign a specific person to your account, you definitely should skip this step. If you’re moving your investments from a brokerage firm where you’ve dealt with a particular broker, though, the decision is more difficult. Most people feel obligated to let their rep know about the transfer.
In my experience, calling your representative with the bad news is usually a mistake. Brokers or others who have a direct financial stake in your decision to move your money will try to sell you on staying. Some may try to make you feel guilty, and badger you. The more that you feel personally obligated to continue doing business with a broker, the more likely it is that your personal relationship is getting in the way of your financial goals. Instead, write a letter if you want to let them know you’re moving your account. It may seem the coward’s way out, but writing usually makes your departure easier on both sides. With a letter, you can polish your explanation, and you don’t run as much risk of putting the broker on the defensive. Just say that you’ve chosen to self-direct your investments.
But then again, telling an investment firm that its charges are too high or that it sold you a bunch of lousy investments that it misrepresented to you may help the firm to improve in the future. Don’t fret this decision too much. Do what’s best for you and what you’re comfortable with.
Filling out transfer forms
Transferring retirement accounts generally isn’t too difficult. In most cases, all you need to do is complete a transfer form. You can use a mutual fund transfer form to move money that’s in a bank account, in another mutual fund, or in a brokerage account. You may only use this form to move investment money that you want liquidated and converted to cash prior to transfer.
You’ll probably need to use one of these retirement account transfer forms for each investment company or bank you’re transferring IRA money out of. If you’re transferring individual securities (for example, stocks or bonds) or want brokerage account features, you need a brokerage account transfer form (and brokerage application forms). The following sections detail the unique features that you should know about when completing a transfer form.
Account ownership and address
Be sure to list your name and address as it appears on the account you’re transferring (look at a recent statement for that account). A discrepancy between the two accounts often leads to an incomplete transfer.
If you’re transferring an IRA, look at a statement for the account you’re transferring and see which type of IRA you have. If you can’t figure it out, either call that company and ask which of the three types you have or just leave it blank, send it to the mutual fund, and let it figure it out from the statement for the account that you’re transferring!
Where the retirement account funds will be invested
On most applications, you simply list the funds that you want the transferred money invested in and the percentage of the money that is to go into each (the percentages must total 100 percent). If you want to divvy up the money into more funds than the form allows space for, list the additional funds on a separate piece of paper and attach that sheet to the form.
Account being transferred
In this section of the transfer form, you tell the fund company where the account you want to transfer is currently held. If it’s in another fund, list the name of the fund (if you’re transferring more than one fund from the same company, just squeeze those names into the space provided). If it’s money in a CD that you’re moving, try to send your transfer form several weeks before the CD is scheduled to mature.
If you don’t get around to sending the form until right before your CD matures, buy yourself more time by directing your bank to place the CD proceeds into a money market or savings type account from which you then can do the transfer.
List the firm where your account is currently being held. You may see the term custodian, which is simply the term for the company holding your IRA — for example, First Low Interest Bank & Trust or Prune Your Assets Brokerage. Some transfer forms ask for a specific department or person who handles account transfers at your old firm. You probably won’t have a clue as to which person or department has this responsibility. If you don’t, you can call the company and try to find out. My advice: Don’t bother. Most funds don’t burden you with having to find this information out — the funds should already know from other transfers that they’ve done with that firm. If they don’t, let them do the work to find out.
List the mailing address and phone number of the company where your account is currently held, and also list your account number there. Attach a copy of the statement for the account that you want to move. If you don’t know the phone number, don’t worry — it isn’t critical.
Authorization to transfer your account
It’s a pain, but some firms that you’re transferring out of may require that you burn a chunk of your day to go get your signature guaranteed at your local bank (a notary doesn’t do this). Fortunately, most companies don’t require this effort — but the only way to know for certain is to call and ask.
Investing on Autopilot
You may have noticed if you were reading earlier in this chapter that I mention that some mutual fund applications include sections that allow you to establish an automatic investment program. This program allows the fund to electronically transfer money from your bank account at predetermined times. You’ll probably need to complete a separate form to establish this service if your fund company doesn’t have this option listed on its original application, you didn’t fill out that part when you opened the account, or you’re investing through a discount brokerage firm. (See the explanation in “Filling in the blanks: Application basics” earlier in this chapter.)
If you have a pile of money sitting in a money market fund and you want to ease it (dollar-cost averaging) into mutual funds, you can use the services most fund companies and discount brokers offer for this purpose. They may have separate forms to fill out or, even better, some companies allow you to establish this service by phone after your money fund account is open. (See Chapter 10 for a discussion of the pros and cons of dollar-cost averaging.)
If you’re investing outside a retirement account into fund(s) at different points in time, here’s a hint: For tax recordkeeping purposes, save your statements that detail all the purchases in your accounts. (Most mutual fund companies also provide year-end summary statements that show all the transactions you made throughout the year.)
If you don’t save your statements, it won’t be the end of the world — as long as you’re investing through most of the larger and better fund companies, which are able to tell you your average cost per share when you need to sell. Average cost isn’t the only or even necessarily the most advantageous method for you to use in determining your cost basis (see Chapter 18).
Finding Help for a Overwhelmed Brain
If you get stuck or can’t deal with filling out forms — not even with the comfort and solace you get from this book — you have two safety nets:
Call the fund company or discount broker and ask for help. (The number is usually listed at the top of the first page of the application.) Providing assistance is one of the many tasks those phone reps are paid to do. If you get someone who’s impatient or incompetent, simply call back, and you’ll get someone else. (Should this happen with the companies recommended in this book, please let me know!)
If you’re dealing with a problem that can’t be solved during the first phone call and you’re working with a representative on it, jot down the person’s name and extension number. And don’t forget to ask which office location he’s in. Some of the larger fund companies route their toll-free calls to various offices, so you may not know where your call has ended up unless you ask.
Visit a branch office. Accessibility is one of the reasons that branch offices exist. Some companies have them; others don’t (see Chapter 9).