Small and medium-sized firms are using outside vendors to handle shareholders' calls more than ever before, but firms need to monitor vendors to ensure they are getting a high level of customer service and to avoid glitches that can produce disgruntled shareholders and redemptions, said industry executives.

Small- and medium-size funds are out-sourcing their shareholder services more because they want to focus on the money management side of their businesses, not back office duties, said Louis Harvey, CEO of Dalbar, a mutual fund consulting and research firm in Boston. Dalbar is the former publisher of this newsletter.

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