Judy K. from Boca Raton did her research, picked her funds, and mailed the forms to open an individual retirement account. Just over a week later, she learned that half of her money had been put in the wrong fund.
Her statement from the Excelsior Funds indicated that only half of the $2,000 investment had been deposited in accordance with her wishes. The other half was in Excelsior’s real estate fund, which was not one of her selections.
Judy’s is the extremely rare case of an account opened with an administrative blunder. Technology has ensured that problems don’t happen often, but “it’s pretty scary to see your money invested in a way you’re sure you didn’t authorize,” Judy says.
Typically, fund companies resolve disputes in a flash. They keep copies of account forms, record telephone instructions, and have other back-up systems that typically prove what went wrong. Once uncovered, mistakes usually can be fixed in a heartbeat.
Many funds even fix your mistakes. Fill in the wrong box and get the wrong fund–which appears to have been Judy’s problem–and a fund firm may set it right anyway, although you could be nervous and frustrated in the interim.
No matter who is at fault, errors must be corrected quickly. Procrastinate and you could wind up on the hook for the blunder.
And with the advent of Internet trading, which is considered mistake-proof since the customer personally enters the data, quickly finding your own mistakes is of paramount importance.
“Open every confirmation and study it well,” says Randy Gore, a vice president at Kansas City-based DST Systems Inc., a transfer agent processing customer accounts for many fund groups. “The longer you wait, the harder things are to fix. Some statements even have notes on the back saying that if you don’t contact the fund within 30 days, the transaction stands,” Gore said.
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Typical errors occur in several areas: monies are invested into or redeemed from the wrong fund, redemptions are made for the wrong amount, the account is registered incorrectly or with misspellings and incorrect addresses.
Your object is to set everything straight, with no monetary or tax consequences, as if it had been done right all along.
Here are the steps to follow to minimize the chance of a mistake–either yours or the fund’s–becoming a lingering problem.
– Keep copies of paperwork or records of phone transactions.
Before sending in an application, copy it. Every time you make a telephone transaction, note the date, time, confirmation numbers for trades, and the person with whom you spoke. Print review copies of on-line orders.
– Contact the transfer agent.
This is who you reach through the fund’s toll-free phone line. If the mistake involves a phone order, ask for the rep with whom you spoke originally. But if the representative who draws your call can’t make you whole and doesn’t have a suitable answer, ask for a supervisor.
“The transfer agent is going to work with you,” says Terence P. Smith, president of The Declaration Group in Conshohocken, Pa., a transfer agent for several fund groups. “If they tell you that the mistake is yours, ask to exchange paperwork; you send what you have and they send copies of what is on file. That should show who is at fault.”
– Contact the fund itself.
The transfer agent works for the fund, but it’s the fund company itself that will turn somersaults to retain customers.
This could be particularly important if you are at fault, especially with on-line trades.
“We don’t want any reasonable request from a customer to be turned down,” says Roderick Williams, head of sales and marketing for Excelsior Funds. “No fund wants customers to go away dissatisfied. No matter who is at fault, contact the fund to see if it will set things right.”
– Contact the authorities.
The state securities department, the National Association of Securities Dealers and the Securities & Exchange Commission take problems like these very seriously. If a problem is not resolved to your satisfaction within 30 days, make your case to people who can hound the fund to get things fixed.
– Don’t try to fix things yourself.
If you have the back-up paperwork and documentation, push the the fund company to set things right and you will avoid any lingering headaches from its mistake.
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Charles A. Jaffe is mutual funds columnist at The Boston Globe. He can be reached by e-mail at [email protected] or at The Boston Globe, Box 2378, Boston, Mass. 02107-2378.