Few other innovations have made as big an impact on the fund industry as the mutual fund supermarket. Today’s popular version of the mutual fund supermarket was introduced by discount brokerage firm Charles Schwab in 1992 and has since transformed the way investors purchase and sell funds. Like the supermarket from which most people purchase food, fund supermarkets bring together a variety of similar products from different vendors. In other words, they allow investors to purchase and hold a broad range of funds from many different fund sponsors through a single brokerage account. Similar to the grocery version, fund supermarkets soared in popularity because of their ability to provide a high degree of convenience, breadth of product, ease of comparison and simplicity of transaction. Read the rest of this entry »
To give you a sense of how fund shareholders are serviced, let’s follow a typical series of transactions beginning immediately after a prospective customer decides to purchase fund shares. In the first step, the customer completes and returns an application for opening a new account to the transfer agent. The application may be returned in a number of ways, including by mail, at a branch office (if one exists locally) or through the Internet. Once the transfer agent receives the application, the transfer agent determines whether it is in good order. Although the definition of “in good order” can vary somewhat among fund complexes, many core elements are consistent. The transfer agent always makes certain to obtain a social security number or taxpayer identification number (in the case of corporate accounts) for tax reporting purposes. The transfer agent also ensures that the initial funding amount complies with any account minimums specified in the fund’s prospectus. If there is any issue with the application, the application is considered to be “not in good order.” In that event, the establishment of the account and the purchase of fund shares may be delayed until the issue can be resolved with the customer. Read the rest of this entry »
