My last statement from a mutual fund contained a “news release” for customers.
Specifically, the news was that the fund would allow me to become an electronic shareholder and receive all statements and reports on-line.
If you haven’t gotten that kind of news from your fund company already, chances are you will soon.
Yet as the fund industry scrambles to adapt to the on-line world and to get customers to adopt on-line technology, the big questions for you as a customer revolve around how, when, where and why you want to deal with your money managers.
While the fund companies make it look as simple as filling out a request or sending in an e-mail, the decision is not that easy, and the choices you make will, in the end, affect your satisfaction with the funds you deal with.
The Internet has been surprisingly slow to change how fund companies deal with customers. Various studies and estimates show that fewer than 10 percent of fund investors bought or sold funds on-line in 1999, largely because such services are not yet widely available.
At most fund firms, opening an account on-line means downloading an application and prospectus, printing it out and then dropping it (along with a check) into snail mail.
Investment companies have been slow to offer electronic purchasing for fear that investors might not honor electronic contracts (since those deals do not bear a signature). That could leave the fund companies open to possible fraud, with people saying they did not open accounts in a fund that has declined in value. The Securities and Exchange Commission has not taken a position on whether electronic records meet legal requirements that a document be signed in writing, and state laws on the subject vary.
Fund firms are overcoming those fears with safeguards that can include written (and mailed) trade confirmations, on-line trading limits and more.
Industry watchers acknowledge that the future holds widespread growth for share classes or entire funds that charge lower costs for electronic customers or charge fees for doing business “with real people.”
(On the flip side of this revolution, some firms will hold stubbornly to traditional ways as a form of “brand identification.”)
With the crucial signature issues not likely to be settled until Congress can approve legislation that gives electronic signatures the legal standing of ink-on-paper, the current focus is on-line service and statements.
For some fund companies, offering e-services is simply a cost-cutting move, a means of saving on printing and mailing costs. Clearly, that was the case with the fund company that sent my news release, as its offer was all-or-nothing, with the only options being all e-mail or all postal service.
Other fund firms see the Web more as a customer-service tool, so that you can get the data you want in the form you want.
“It’s important that you, as a customer, get the information in the form that it is most useful,” says Jon Pauley, vice president of e-commerce for the Invesco funds. “If you don’t read your e-mail, but you look at anything that has the fund’s name on it, then you want to get statements and reports the old-fashioned way. If you always read your e-mail and follow links to the reports, then you’ll be happier doing business on-line.”
Indeed, Fred Marius, president of the Lincoln, Mass.-based Quant Funds, says his company has found that investors want up-to-date information on-line but also in their mailboxes just in case.
“Some people are being asked to opt out of services that they really want,” Marius says. “Make sure you are aware of what you will and won’t get before making a change, and look for companies that will give you the services you want.”
In short, if your fund company has “news” on the electronic front, examine it closely to see which (if any) on-line services are right for you. In the absence of news, your money manager’s Web site may show whether it offers services that can make your life easier, or if you should just stick to the status quo.
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Charles A. Jaffe is mutual funds columnist at The Boston Globe. He can be reached at The Boston Globe, Box 2378, Boston, Mass. 02107-2378 or by e-mail at jaffe@globe.com.
