“An educated customer is our best customer” has been the memorable slogan of Syms for four decades.
As the Baby Boomer population approaches retirement in full swing and the economy stretches every American’s budget, the personal finance media is increasingly arming investors with information on their fund investments.
Fund companies can get in front of this trend by becoming the bearer of this information, instead of the brunt of it. Believe it or not: An educated mutual fund customer is the best customer.
In an Associated Press story Monday, for instance, absolute-return funds are put under the microscope for what columnist Mark Jewell says are terribly misleading labels since they can lose money just like any other investment. No wonder the 21 absolute-return mutual funds on are market are hot sellers, he writes—quickly warning that their market-neutral strategies are “already falling short of expectations in many instances. Make no mistake: Investors can lose money.”
Those funds with a five-year track record have lost an average of 0.6% a year, he says. While Jewell does concede that in the past year, absolute-returns have delivered 4%, he fails to stress that unfavorable market conditions for the past number of years have been a challenge to all asset managers. All things considered, a 4% return is admirable.
Then there is the recent spate of articles on hidden 401(k) fees. Here, we would have to agree that fund companies and administrators make it extremely difficult for investors to see what they are paying. Putnam Investments, hovever, is leading the way on clearly spelling out fees. Now that returns on equity funds are, as PIMCO’s Bill Gross predicted several years ago, lucky to be in the low single digits—investors are going to heed to advice of personal finance columnists and editorials from the likes of Vanguard founder John Bogle and pay very, very close attention to what they are paying.
Fund companies would serve themselves and their customers better by following Putnam’s lead and letting investors know what they are paying, rather than directing them to prospectuses or statements of additional information to try and figure it out.
Finally, a number of regional papers, citing data from Fidelity, are reporting that 401(k) hardship loans have reached a 10-year high. We hearity agree that living in the moment by robbing Peter to pay Paul is a horrible idea, and would add that parents who are putting their children's college savings plan ahead of their own retirement plans are admirable but misguided.
Plan administrators and fund companies that host seminars or post general news on their websites should definitely need to get these messages out on making retirement the No. 1 financial goal--again and again and yet again.
Talking directly to customers to address these and other issues that the financial press is telling them are critical is the best way to get ahead of all of this bad news, and to earn investors’ respect and trust.
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