Chapter 19

Common Fund Problems and How to Fix Them

In This Chapter

Dealing with fund company representatives

Moving money into and out of funds

Fixing paperwork, online snafus, and other problems

Established fund companies and discount brokerages have hundreds and, in some cases, thousands of telephone representatives who field phone calls and process stuff you send them in the mail. Most of the bigger and better companies recommended in this book do a good job of training their employees, so you should receive competent assistance. But keep in mind that these people are human — that is, not perfect. Some are more competent and service-oriented than others at getting the job done right the first time with the proper attitude. Although I can’t guarantee that this chapter is a page turner, it can help bail you out and soothe your nerves when you just don’t know how to get a problem fixed.

Playing the Telephone Game

When you call fund companies to ask a question or express a concern, you may end up speaking with someone who doesn’t know how to fix your problem, gives you the runaround, or worse — gives you incorrect information. Here’s what you can do to ensure that you get accurate solutions:

Know the representatives’ limitations. Fund company reps are there to provide assistance. Don’t depend on them for tax advice. (Most of the larger fund companies have retirement account specialists who have more detailed knowledge about tax issues relating to those accounts.)

Talk to someone else. If you don’t get clear answers or answers that you’re satisfied with, don’t hesitate to ask for a supervisor. Or you can simply call back on the toll-free line, and you’re sure to get another rep. This method is a proven way to get a second opinion to make sure that the first person knew what he was talking about.

Take names and notes for thorny problems. If you’re dealing with a problem that could cost you big bucks if not properly solved, take notes of your conversation. Write down the name of the representative you spoke to, the office she’s located in, and her telephone extension. That way, you have some proof of your good efforts to fix things when you need to complain to or are summoned by a higher authority (for example, a supervisor, the IRS, and so on). E-mail or a written letter can be effective ways to document your problems and concerns, although some companies don’t provide e-mail addresses.

Visit the fund company’s Web site. The larger fund companies have extensive Web sites that are equipped with good search capabilities. (See the Appendix for the addresses of the fund companies.)

Trouble-Shooting Bungled Transactions

With all the sound-alike fund names, you can mistakenly have your money deposited into the wrong fund at some firms. That’s why it’s a good idea to look at the statement that confirms your purchase to verify that the deposit amount and the fund into which the money was deposited are both correct.

If the fund company makes a mistake, it should cheerfully fix the problem. (It may need to do a bit of research first.) It should be willing to credit the correct amount to the fund you requested as of the date the money was originally received.

With increasing numbers of fund investors conducting transactions online, I’m hearing about more problems with such trades. Don’t get me wrong — trading online is a fine thing to do, and the vast majority of transactions occur without a hitch. However, accidentally duplicating an online trade is a good example of a common mistake.

If you make a mistake trading online (or by phone), get on the phone and request help. Ask for a supervisor if frontline employees are unhelpful. Don’t accept a response such as, “We can’t correct online trades.”

Specifying Funds to Buy at Discount Brokers

When you invest through most mutual fund companies, their account application and other forms allow you to indicate what fund(s) you want to make your deposit into. Not so at discount brokerage firms.

If you want your deposit to a discount brokerage to be immediately invested into a particular fund or funds, write your instructions and send them with your deposit. For example, if you mail $5,000 for an IRA deposit to a discount brokerage firm and you want the money divided between, say, the Fairholme Fund (FAIRX) and the Dodge & Cox International fund (DODFX), Figure 19-1 shows you how to word the letter.

Figure 19-1: A sample letter to specify funds with discount brokers.

Note the last sentence in the figure is a reference about what to do with dividends and capital gains distributions. Try to be as precise as possible with the fund names. The ultimate in precision for a broker is the fund’s unique, five-letter trading symbol (three letters for exchange-traded funds).

Making Deposits in a Flash

Maybe you have an account open and just need to feed it in a hurry. Most often, this situation happens when you need to fund a retirement account, but it may also happen if you’re on the verge of overdrawing a money market account due to outstanding checks and withdrawals.

If you need to make a deposit in a flash, you basically have the three following options:

Write a check. You can stop by and deposit it at the company’s local branch office if you’re dealing with a company with a branch location near you.

Wire the money from your bank account. If the fund company isn’t in your neighborhood, don’t despair. However, note that wiring usually costs money on both ends.

After you’ve set up the wiring feature on your fund account (see Chapter 16), call your fund company to see what information you need to provide to your bank in order for the wire to be correctly sent. This usually includes

• The name of the bank your fund uses for wires

• The bank’s identification number (the nine-digit ABA number)

• The title and account number of the fund company’s account at that bank

• Your name as it appears on your fund account

• The name of the fund account

• Your own account number

If you don’t have the wiring feature set up on your account, establishing this feature takes some time because you must request, fill out, and mail a special form.

Electronically transfer the funds. Electronic funds transfer, which is like a paperless check, usually takes a day longer than a wire, but it’s free. Simply call your fund company and say how much money you want to move. As with wiring, if you don’t have this feature set up, you can establish it by requesting and filling out a form from the fund company.

Verifying Receipt of Deposits

When you send money to a fund company, how do you know if the fund company received your money? Unlike when you use a bank ATM, you won’t get a deposit slip with your transaction — at least, not right away. Fund companies mail you a statement (usually the day after they receive and process the deposit) that shows you the transaction. You can keep a log of deposits on paper or with a computer program and check them off when you receive the deposit statement, once a month, or quarterly.

If you can’t wait for the mail, you can call the fund company’s toll-free number and verify receipt over the phone. Many fund companies have secure Web sites and automated phone systems that allow you to check on stuff like this quickly, without waiting for a live person to talk to.

Transferring Money Quickly

For nonretirement accounts, if you have a money market fund with check-writing privileges, writing a check to get money is quick and simple and costs nothing. Another option, which you can use on all types of accounts, is to call the fund company and request a telephone redemption. The day after the next financial market close, a check should be cut and mailed to you. If you need the check faster than the mail service can get it to you, you can provide your express mail company (for example, FedEx, UPS, or DHL) account number. Some fund companies also allow you to pick up redemption checks at their headquarters. Call to see whether they provide this service.

Banks and other recipients of checks from your account may annoy you by placing a hold for a number of days on the funds from your checks. For checks that you write yourself, the hold is understandable because the check recipient has no way of knowing whether the money will be in the account when the check is ready to clear. But if the check was issued by the fund company, then the money has already been taken from your account, so the check is almost as good as cash to recipients — they just need to wait a couple of days for receipt of the funds.

Banks normally place up to a five-day hold on out-of-state checks. (Odds are that your fund company clears checks through an out-of-state bank.) If a bank doesn’t make the money available to you quickly, ask to speak to the branch manager or some other higher-up. Gently remind him that you can move your bank accounts to a less bureaucratic bank.

Wiring and electronic funds transfers are other alternatives that you may prefer because you don’t need to wait for a paper check to clear. If you just realized that you need money to close on a home purchase tomorrow, these are your best bets. See the section “Making Deposits in a Flash” earlier in this chapter for how these services work.

For retirement account withdrawals, you need to make requests in writing. Perhaps you need to withdraw money before the end of December to meet the IRS’s mandatory withdrawal requirements after age 701//2. The good news here is that you don’t need to have received the funds before the end of the year. As long as the distribution is made by the end of December, the IRS will be satisfied.

Losing Checks in the Mail

Checks and other stuff can get lost in the mail. If you wrote a check and made it payable to the fund company, you don’t need to stop payment. If you’re depositing checks with your fund company that someone else wrote to you, the check’s issuer may want to stop payment when you report to it that the check is lost and you want it reissued, if it’s concerned that you might cash it.

A bigger pain is having to redo a bunch of account applications that you may have sent with the check(s). If you are completing a pile of applications and transfer forms, you may want to keep copies. Or, you investigate if the fund company allows you to complete forms through its Web site.

Registered mail and certified mail don’t eliminate the problem of lost mail. They just indicate whether the mail was received. Don’t waste the money or the time needed to go to the post office to use these extra mail services.

Changing Options after Opening Your Account

Perhaps now you wish you had check writing on your money market fund. Or you want to establish a regular monthly investment plan so that money is sent electronically from your bank account to some funds. How do you add these features after you’ve opened an account?

Although you can add some features over the phone, you can only set up most features, particularly the ones that require your signature — such as check writing — through short forms that you request by phone. (Some fund companies allow you to add these account features via their Web sites, as I discuss in Chapter 16.) You can change previously established options, such as reinvestment of dividends, over the phone or via the fund company’s Web site.

Changing the registration of your accounts is more of a pain. A letter is generally required, for example, if you marry and change your name or want to add your spouse to the account. A signature guarantee may be required — these guarantees are provided by banks and brokerage firms. Don’t confuse this requirement with getting something notarized, which is different.

Making Sense of Your Statements and Profits

Can’t understand your fund statement? Don’t know how much money your fund is making for you? Welcome to a large and nonexclusive club. See Chapter 17 for the full scoop.

If you want a tax, financial, or legal adviser — or a savvy relative — to help you keep an eye on your investments, you can ask that she be listed on your account as an interested party to receive duplicate statements. Simply write to the fund company and include the accounts you want the interested party to receive statements for and provide that person’s name and mailing address.

Changing Addresses

Normally, fund companies require that you make a change of address in writing, but over time more fund companies are establishing security procedures that allow you to make a change of address by phone or via a Web site. The safeguards include a requirement that you prove that you’re who you say you are on the phone (give your mother’s maiden name and all that). The fund companies also mail confirmations of the changed address to both old and new addresses and don’t allow money to be transferred out to the address for, say, 15 days to give the mail sufficient time to deliver confirmation of the address change to both the new and old addresses.

Finding Funds You Forgot to Move

Every year, people literally throw away hundreds of millions of dollars in investments, including investments in mutual funds. You may have done this if you’ve moved around a lot without systematically sending changes of address to fund companies and placing mail-forwarding orders with the post office. After fund companies try for a long time to send mail to your old address, they eventually throw in the towel, and your account becomes dormant. No more statements are sent for a number of years, after which time your account is considered abandoned!

By law, the mutual fund company must transfer your abandoned money to the treasurer’s office (called escheatment, for you Trivial Pursuit or game show buffs) of the state in which the fund company does business or the state in which the last registered address appeared on your account. This transfer may happen from within a few years to more than a decade after the fund company loses contact with you. If you don’t claim the money within a certain number of years after that, the state gets to keep it.

If you vaguely recall that you had funds with a particular fund company way back when, call the company. You don’t need to remember the specific funds you invested in. By using your name, Social Security number, old mailing addresses, and personal stuff like that, the fund company’s computer system can find your accounts and determine whether they were turned over to the state. You can also try contacting the state treasurer’s office in the states in which you’ve lived to see whether they have any of your abandoned accounts. (You can do this as well for recently deceased relatives in the event you’re concerned that you may have overlooked some of their accounts.) If you find your accounts, please write to me in care of the publisher and let me know — these successes make me happy!

Untangling Account Transfer Snags

Transferring accounts from one investment firm or bank to another can be a big pain. Even obtaining the correct transfer paperwork and completing it are challenges — that’s why I detail how to do these steps in Chapter 16.

Problems happen most often with retirement accounts and with brokerage account transfers. Some firms are reluctant to give up your money, and so they drag their feet, doing everything they can to make your life and the lives of employees who transfer accounts at your new investment company a nightmare. The biggest culprits are the supposed “full-service” brokerage firms that employ commission-based brokers. They’ve lost a lot of money flowing out to no-load and discount brokers’ mutual funds, and they do what they can to hang on. The unfortunate reality is that they’ll cheerfully set up a new account to accept your money on a moment’s notice, but they’ll drag their feet, sometimes for months, when it comes time to relinquish your money.

Don’t let this foot dragging on the part of brokerage firms deter you from moving your money to a better investment firm. Remember that the transfer should, under securities industry regulations, be done within 30 days. If it’s not, hammer the villains! Should the transfer not be complete within a month, get in touch with your new investment firm to determine what the problem is. If your old company isn’t cooperating, a call to a manager there may help get the ball rolling. To light a fire under his behind, tell the manager at the old firm that you’ll be sending letters to the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) if he doesn’t complete your transfer within the next week. Then do it.

In addition to uncooperative brokers, certain assets present problems with transfers. If you purchase any house-branded mutual funds at commission-based brokerage firms, in addition to buying into what’s likely a relatively mediocre family of funds, you also can’t transfer their funds as they are. You must first have them liquidated through the broker whose name is on them so that the cash proceeds can be transferred. Most annuities work the same way.

Transfer individual securities, such as stocks and bonds, to a discount broker. That way, if you later decide to sell them, you save on commission charges. Limited partnerships generally can’t be liquidated, and everybody levies fees to hold them — another reason not to buy them in the first place. If you want less account clutter, transfer these to the discount broker you’re otherwise going to be using.

Eliminating Marketing Solicitations

If you do business with many companies and their marketing folks are driving you batty, call your fund companies and ask them to code your account on their advanced computer systems so that you won’t receive anything other than statements and reports on your funds. Fund companies are required under SEC regulations to honor such a request. Fund companies are happy to oblige — they don’t want irritated customers.

As for all the other junk mail you get, send a request not to receive junk mail (including your name, complete home address) to the Direct Marketing Association, Mail Preference Service, P.O. Box 643, Carmel, NY 10512. You can also complete the form on the association’s Web site at www.dmachoice.org.

Some fund companies and brokers may call you at home soliciting your purchase of investments. They tend to focus on people with large cash balances sitting in their accounts. To stop any type of sellers from calling you in the future, you have the Do Not Call Registry on your side. Register for free either online at www.donotcall.gov or call (888) 382-1222 from the number you want to register.

Digging Out from under the Statements

If you’re being buried in paperwork from statements and transaction confirmations from too many fund companies, consider consolidating your fund holdings through a discount broker. Trade-offs do exist — you pay more in fees for the convenience that these accounts offer (see Chapter 9). Some fund companies also have ways to consolidate statements, but you may have to specifically request this service for your statements.

If you truly abhor getting paper statements in the mail, increasing numbers of fund firms allow you to “turn off” receiving such clutter and view your statements online. Visit your favorite fund company Web sites for details.

Getting Older Account Statements

Perhaps, for reasons of nostalgia or taxes, you need copies of a statement that’s more than a year old. Most companies should have no problem providing it (and some have Web sites allowing you to retrieve such history). Some smaller companies may, however, charge you something like $10 per fund per year requested. So be choosy. The main reason you’d request a statement is to research how much you originally invested in a mutual fund held outside of a retirement account. If you sold or are thinking about selling shares of the fund, you may have to figure out the fund’s cost basis for tax reporting purposes (see Chapter 18). In the future, be sure to keep your statements so you don’t need to ask for copies.

If you’re going to sell all the shares that you hold in a fund, check to see if your firm can report the average cost of the shares sold. If its accounting system can do this, you’re golden, and you don’t need to bother with getting the old statements.