Investors are feeling better about the quality of service they're getting from U.S. fund shops according to the latest shareholder survey by the National Investment Company Service Association (NICSA). But with just over half of all respondents saying they are pleased with the service they are getting, there's still plenty of room for improvement .

The annual Shareholder Service Satisfaction Survey, which made its debut in 1987, is designed to gauge customer satisfaction and establish certain benchmarks to track underlying trends in the fund industry. NICSA, headquartered in Wellesley Hills, Mass., reported that only 55% of its respondents said their fund family provided "excellent" or "very good" customer service in 2002, a 2% increase from 2001 That compares with a 59% approval rating in 2000 and 61% in 1999, a time when technology stocks were flying high and investors were eager to read their account statements.

In terms of its methodology, the survey is comprised of a detailed questionnaire sent to 32,000 investors, targeting both men and women, across 31 fund families. Each of the participating fund families mailed 1,000 copies of the survey to their clients, with one firm sending out 2,000 forms. The potential respondents are randomly selected based on a number of criteria, including their type of account, number of shares owned, account balance, recent transaction activity and home address.

"The number of participants continues to grow each year as fund families of all sizes realize the benefits of measuring customer service satisfaction and linking these statistics to their bottom-line results," said Barbara V. Weidlich, NICSA president, in a statement.

The information was collected and reviewed by Access Data of Pittsburgh last summer, and delivered to the individual firms in late October. The number of surveys returned for analysis in 2002 totaled 5,873, a 19% response rate, providing a significant measuring stick for the fund community.

"This survey is a highly effective, inexpensive tool that enables fund providers to better understand the issues their customers are facing, track their annual progress versus a number of benchmarks, and identify areas of opportunity," said Brett Sullivan, Access Data's director of research.

The Older Crowd

A bulk of the responses came from investors age 65 or older, which is consistent with results from the previous three years. However, that number has fallen from 40% in 2000 to 33% in 2002. The second-largest group of respondents ranged from 50 to 59 years old, making up 24% of the total number of participants. Overall, 67% of the participants were over the age of 50 at the time of the survey. That said, the most popular reason for investing, the survey indicated, was for retirement-planning purposes.

The respondents said that factors that matter most with regard to investment decisions are fund performance, fund reputation, low management fees and low sales charges. Other factors include broker recommendations and dividend payouts. Things that have little impact on their decisions are newspaper articles, advertisements and mail solicitation.

Within the focus group, the most popular means of contacting their fund was phoning a representative, mail and calling their brokers. However, a robust 46% of the participants admitted that they haven't made contact with their funds in the last six months, a significant number considering that number was at 38% just two years ago. Only a scant 14% used the Web site for correspondence, matching its 2001 total. But on the flip side, that number has more than doubled since 2000 when it was at a more modest 6%.

While overall satisfaction has improved marginally from 2001, some of the same old problems still exist. The need for a more straightforward account statement and a reliable, multifunctional Web site appear to be the most glaring weaknesses at these fund houses. Seventy-six percent of the participants are pleased with the format of their account statements - a pretty solid number at first glance. But when one considers that nearly 90% of the respondents stressed that a consolidated statement is one of the most important services a fund can offer, that number is not really up to snuff. Essentially, that means one in every four investors is having difficulty reviewing their statements.

Web Sites Not up to Snuff

Also at issue, customers are still not totally comfortable using company Web sites for transactions, account information and research. Only 67% of investors find their fund's Web site suitable for executing transactions. Yet 67% are also over the age of 50 and, perhaps, not yet acclimated to the Web like their younger counterparts. It is fair to say that mature members of the investment community generally feel more comfortable with a bricks-and-mortar operation. But that does not change the fact that fund companies need to focus on making their Web sites more appealing and easier to navigate.

As a whole, the data revealed a minimal shift in sentiment from 2001. It is more relevant to look at the longer-term comparison. For example, back in 1999, investors expressed a more positive attitude about their dealings with fund companies. It is difficult to determine, however, if this was a true reflection of investor sentiment. One has to put that in context with market conditions. It is a basic rule of human nature that people are less likely to air their grievances when things are going well, in this case, racking up big returns. It's when things go sour that people look to be much more critical of their fund

Given the market's dismal performance in 2002 and the tenuous outlook for 2003, one has to wonder if some folks will make further strides in interpreting their statements if they're still too scared to open them. But make no mistake, satisfying customers 55% to 61% of the time is far from a crowning achievement.

Copyright 2003 Thomson Media Inc. All Rights Reserved.

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