When your money is in the hands of strangers

Your Funds

June 18, 2000|By CHARLES JAFFE

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 online.

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 online world and to get customers to adopt online 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 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 online in 1999, largely because such services are not yet widely available.

At most fund firms - even some of the new Web-based companies - opening an account online 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). But that is likely to change now that Congress has passed a law giving electronic signatures the legal weight of paper signatures. The law, which President Clinton said he would sign, takes effect Oct. 1. Customers of all manner of companies would be able to sign documents online with a click of a mouse.

Fund companies soon will no longer have to overcome so many fears with safeguards that can include written (and mailed) trade confirmations, online trading limits, and more.

If buying or selling online is not yet a big feature, e-statements are increasingly popular.

What's more, some fund firms are making real efforts to get consumers online. The Lincoln, Mass.-based Quant Funds, for example, have lowered their initial minimum investments for electronic accounts.

Company President Fred Marius sees the day when electronic customers may be able to escape redemption charges that traditional customers might face.

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.") The current focus is online 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 you can get the data you want in the form you want.(My personal preference would be to get account statements by mail but quarterly and annual reports electronically.)

"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 online."

Indeed, Marius of the Quant Funds says his company has found that investors want up-to-date information online 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) online 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.

Charles A. Jaffe is mutual funds columnist at the Boston Globe. He can be reached by e-mail at jaffe@globe.com or at the Boston Globe, Box 2378, Boston, Mass. 02107-2378.

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