Phone representatives at fund companies spend their days answering the usual boilerplate questions: "Who manages this fund?" and "What is its expense ratio?" But how prepared are these reps to answer some tough, even embarrassing questions? I decided to find out.
I called the toll-free customer service numbers of eight of the larger or more popular fund companies. I tried to come up with some tough questions focusing either on recent events at a specific fund company or on topics that are pertinent to investors, such as fees or Y2K.
Even though some of my questions were out of the ordinary, none were too difficult. I was surprised that some reps couldn't give me clear answers. Some were dumbfounded by some of my questions, while others were willing to wing it -- for better or for worse.
See for yourself how some of these reps performed under the hot lights:
PBHG: Buy a Paper, Lady
Prolific fund manager
after a well-publicized legal scuffle over the terms of his contract with PBHG.
I asked PBHG's phone rep to tell me why McCall left.
Answer: "He just decided it was time to leave." For more information, I was told to look up
The Wall Street Journal
articles on the subject.
That nonanswer reveals nothing about the circumstances of McCall's departure or where he went. But I was not shocked by the empty response. The firm has said little publicly to anyone about the affair.
Oakmark: Gimme a Reason
Oakmark fund has not had the best returns over the past several years. Actually, the fund's five-year annualized return of 16.4% dramatically trails the 25.6% return of the
Vanguard 500 Index fund.
I asked an Oakmark rep why I should buy this fund with its index-lagging performance.
"For one, it is very hard to make that comparison," said the rep, noting that Oakmark is a value fund and the
is more of a growth indicator.
OK. But why buy it?
"Over the long haul, it's a reliable fund," he said, adding that they tell shareholders they should hold the fund for five years or more.
Postscript: I called the fund's manager, Robert Sanborn, shortly thereafter, who disagreed with his phone rep on one key point.
"I generally think the S&P 500 is the best bogey for the Oakmark fund. We look very unlike the S&P 500, which is a conscious choice.
But I do think it's the most appropriate benchmark ... frankly, I think it is going to be so easy to beat over the next five years. That's I why want to keep it as my bogey."
Sanborn's pitch was better.
Vanguard: Bogle Brawl?
The forced retirement of
from the company's board has drawn extensive press coverage. Vanguard did post its own clarification of media reports on its Web site a few weeks ago, but I wanted to see how prepared its reps were to address this touchy subject.
The first time I called, I asked if Bogle was really fighting with Vanguard Chairman
Fighting? "That was taken out of context," said the rep, who mumbled something about age 70 being the mandatory retirement age before he put me on hold. I hung up.
I called back a day later for a better answer. This time, a different rep was more upbeat and much quicker with an answer.
"Nothing has changed at all. Everything is the same. He's still here at Vanguard," the rep said.
"He might not be on the board.
But he will still be at Vanguard overseeing everything."
Well, not quite. Jack Brennan is the chairman, chief executive officer and president, and has been running the firm since 1996. Bogle is still senior chairman and will remain active on behalf of Vanguard shareholders, writing and speaking about fund issues, according to the company.
Brennan, who spends several hours a month answering the phones himself, might want to put in some overtime.
Schwab: Get to the Point
Before I called
, I knew that one share class of its S&P 500 index fund carried a pretty fat expense ratio: 0.35%. It looks bad when you compare it to the Vanguard 500 Index's expense ratio of 0.18%.
I wanted see if one of Schwab's reps could explain the heft of the expense ratio. My questions didn't seem very difficult: "Do you have an S&P 500 index fund?" and "What is its expense ratio?" But it took four frustrating phone calls to get a clear answer.
Basically, Schwab's 500 fund has two retail share classes, each with a different minimum investment. The
Investor share class carries the 0.35% expense ratio and a low minimum of $1,000. On my first call, the phone rep talked about this fund but didn't mention the minimum.
I asked how Schwab could charge a fee that's much higher than those for some index funds. Right off the bat, he seemed confused as to what an expense ratio was exactly, and admitted that he doesn't usually deal with mutual funds.
"What are you looking to do here?" he asked. I, in turn, asked if there was another phone number I could call. "No, this is pretty much it."
I tried again. This time I got a different service rep who told me about the
Select share class, which carries a lower fee of 0.19%. But the rep did not mention it requires a $50,000 minimum investment. (The Vanguard 500 Index fund requires a $3,000 minimum.)
During my third call, I was accidentally disconnected.
Undaunted, I tried one more time and finally got an explanation of the differences between the share classes.
But I still never got a good answer as to why the Investor shares' expense ratio is 35 basis points.
A Schwab spokesman says the service reps are not equipped to answer specific questions about how Schwab's funds compare to those at other firms.
Maybe they should be.
My nonscientific survey simply points out that investors can't always assume that they are getting clear or correct information from customer service. Sometimes you have to try and then try again.
Please feel free to share your own stories with me. Or if you have a prickly question you'd like me to ask a fund company, send it along to
Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.