When your fund manager leaves

You own a mutual fund that has been a hot performer. Then you hear some bad news. The manager is leaving, going to another firm.

It’s a common scenario on Bay St., where top-performing fund managers often get snapped up by the competition. The latest defector is Allan Jacobs of Sceptre Investment Counsel. His small cap fund had 20 per cent annual returns since he took it over in 1993.

When your fund manager looks for a change in scenery, you have to make a big decision: Do you stay or do you follow? In the short term, you should stay. Don’t rush out the door, but sit back and watch for a while.

Switching usually costs you money. You may have deferred sales charges to pay on the old fund, as well as sales charges on the new fund. And if the fund is not held in your RRSP, you may have to pay capital gains tax when you redeem.

If you bought the fund through a financial adviser, ask for help in assessing the change. But remember that advisers make more money if you switch than if you stay. That’s because they get big up-front commissions paid by fund companies on deferred sales charge funds (and ultimately financed by investors through management fees). So, your adviser has a hidden incentive to recommend a move.

Here’s what you need to know when a fund manager leaves. Who are the replacements? Do they have the same investment style and a track record of working together with the outgoing manager? Do they plan to shake up the portfolio or leave it the same?

If it’s clear that new managers are making significant changes to the portfolio, you might want to sell. Getting rid of stocks picked by the old manager is costly. All unitholders, including you, will have to absorb the transition costs.

Should you buy the old manager’s new fund at a new company? My advice: Don’t rush into it. Take time to let things settle down. Wait for the manager to do all the road shows and media interviews. There will be transition costs here, too. Let someone else pay them.

Don’t let yourself be overcharged

My work has taught me to question all charges and ask if they’re necessary. If you fail to do it right at the beginning, you may find it hard to get a refund later. You will have little bargaining power and the company may ignore you.

Last Saturday’s column was about a Rogers home phone customer, billed for $68,000+ after a residential move. She spotted the mistake right away, but had a terrible time trying to get it resolved. And if she hadn’t paid attention, she would have been overbilled again while trying to clear up the initial mess.

I’ve had a few experiences of easily getting a discount when a price is too high. Last week, I bought two books online at Abebooks.com, one from a dealer in Michigan and one from a dealer in New Jersey. The first charged $8.99 (US) for shipping, but the second one charged $11 (US). Here’s the correspondence.

Hi there, Stephanie. I just wanted to mention that the shipping fee seemed high (the book is $13.86 and the shipping is $11). I ordered another book from Abebooks yesterday, which is longer and heavier. Maybe you can explain the difference, why a larger book should be less expensive to ship.

Hi Ellen, Thanks for your email. I have issued a shipping refund of $4. Now that the U.S. Postal Service has changed its policies of shipping (no longer offering surface mail as an option for international packages), we are required to send every package air mail or priority. We often get burned on postage this way because Abebooks.com takes a percentage of the shipping and handling fee that is charged. We have found that a higher shipping rate allows us to guarantee that our expenses are covered. We have no problem refunding a portion of your shipping costs, though.

I had another experience this weekend, when I bought a plant for my garden (a hosta) that was marked down to $9.78. The Loblaws clerk rang it in at $12.99, the original price. I asked her to double check and she said yes, the right price was $9.78. But she didn’t say anything about the voluntary code for scanner price accuracy, which allows you to get something for free (up to $10) if the store overcharges you.

I reminded her and she took $10 off the original price. That left me paying $2.99. Later, I realized this was wrong. The sale price was under $10, so I should have gotten the plant for free. I went back to another Loblaws store this morning, showed the bill and immediately got a refund of my $2.99, plus 42 cents tax.

Don’t stores train their cashiers in the scanner accuracy policy? If this was a law, instead a voluntary code, I’m sure they would work harder to put it into practice.

New York suing Dell for bad customer service

Eliot Spitzer, New York’s former Attorney General, was an activist for investor rights. Now he’s elected as governor, his successor Andrew Cuomo is fighting for consumer rights. Last month, he filed a lawsuit against Dell Inc. for misleading customers with its financing offers and not honouring warranties, service contracts and rebates.

The claim says Dell customers get a runaround when trying to receive a promised rebate on computers and are subject to a “telephonic version of hot potato” after enduring long wait times for technical support. “Dell’s service is anything but prompt and efficient,” the complaint says. “Customers are disconnected before they reach the elusive representative who presumably is able or willing to help them.”

I bring this up because Dell was one of the first to oursource customer service to India. Its difficulties with delays and disconnections apply also to Bell Canada, which has been diverting customer service overseas (particularly Sympatico technical support).

The Montreal Gazette, meanwhile, is writing about customer service and has a blog for contributions by readers. Tech reporter Roberto Rocha is focusing on what he thinks are the three worst offenders: Banks, wireless telephone carriers and technical support from Internet service providers.

Check out the part where I talk about customer service outsourcing, along with telecom industry analyst Troy Crandall.

Use Google to get results

It’s easy is to find consumer information on the Internet. You may think you’re the only one in the world having a problem with your car, computer, fridge or cell phone provider. But do a search and you’ll find others in the same position.

Here are some of the best complaint sites I found:
My3cents.com, ConsumerAffairs.com and the new Consumer Reports discussion forums.

Suppose you’re stuck in voicemail jail. You’re always talking to a call centre and no one will give you the name and number of a supervisor or senior executive. As a result, you can’t escalate your complaint to a higher level. Don’t despair. Google the company’s name and look for press releases, which often have names of numbers of company honchos, plus media contacts. Contact the media contact and ask how to reach a real person.

Today, I talked to a reader about her Internet service provider, 3Web.com. It had cancelled her service as requested but refused to send the promised refund. She kept calling and writing and getting nowhere.

I searched for 3Web complaints and found a discussion forum at CanadianISP.com It didn’t take long to find the email address for the company president. I told her to write to him and say I was watching the case. Within minutes, literally minutes, she had an email from him saying he’d get her that refund ASAP. (See Elizabeth’s story below.)

It’s easier to get redress when you can use the Internet to find others with similar complaints and reach senior executives by phone or email. I wish everyone would learn these techniques. Please tell me how you use the Net to pursue your battles.

Why would anyone sign a long-term contract?

This is one of the questions readers ask, especially when I write about the messes people get into trying to break their contracts. Life is uncertain, things change, why tie yourself down? You have to pay big bucks to buy your freedom, if the company agrees to let you out of the contract at all.

I know why people sign long-term contracts for cell phones. They get great incentives, such as a free or discounted phone and lower monthly rates. Same with Internet service providers, who also try to lock in subscribers with enticing deals.

But with cell phones and Internet service, your contract may not protect you from price increases. Read the terms and you’ll see most companies can still pass along increases on a regular basis. So what’s the point?

That brings me to natural gas and electricity contracts, which do protect you from future price increases. That’s their attraction to homeowners and renters. But the premium you pay for security can be mighty high.

Take natural gas prices, which spiked in price a few years ago. Those who signed early did save money. (I had a gas contract and I saved money.) However, you don’t know whether you’ll save or not. It’s a gamble. And in the last 18 months, people who signed gas contracts have lost money. Some are paying double the current market rate. (Thankfully, I didn’t resign.)

Electricity, too, carries a much higher price in contracts than if you stay with your utility and pay the current market rate. Since the price is still partially controlled by the Ontario government, there’s no reason to sign at this point, in my view.

When it comes to personal finance and investing, there are lot of questions that fall into the “why would anyone” category. Here are a few of mine and I’d like to hear some of yours.

–Why would anyone pay bank fees instead of moving their business to a no-fee bank or a customer-friendly credit union?

–Why would anyone buy mutual funds with high management expense ratios when there are lots of low-cost options?

–Why would anyone buy life insurance as an investment instead of buying a no-frills term life policy?

Banks have more antagonists than advocates

In my column yesterday, I talked about a survey of consumer attitudes toward their banks. Only 25 per cent of clients of the Big Five banks think enough of their service to recommend them to friends and family.

Meanwhile, 36 per cent of the Big Five’s customer base are antagonists. They find fault with almost everything the banks do.

Credit unions and non-traditional providers of financial services (such as ING Direct and President’s Choice Financial) have a higher approval rating. With credit unions, 34 per cent of customers would recommend them to others.

Buisnesses can grow only if they surprise and delight their customers, says IBM Global Business Services (which sponsored the survey). Banks talk about customer satisfaction, and measure it constantly, but they haven’t learned how to create customer advocates. That’s why there’s such a public outcry about bank fees.

Why do you think banks have so few advocates? What can they do better? Here are some comments I’ve received from readers below.

Also, I’d like to hear from customer advocates. What companies impress you so much that you would tell your friends and family about them?

Do you have a dangerous appliance?

Your dishwasher can be a lifesaver when you have lots of people to feed. You don’t want to stop using it, but you may have to start washing dishes by hand if you have a machine that’s a fire hazard.

Maytag had to recall 2.3 million dishwashers in February because liquid rinse-aid could drip onto the wiring and ignite. The problematic appliances were sold between July 1997 and June 2001. Maytag’s new owner Whirlpool Corp., prodded by the U.S. Consumer Product Safety Commission, offered a free in-home repair or a $75 rebate on a new dishwasher.

General Electric had to recall 2.5 million dishwashers, also sold between 1997 and 2001, last month for the exact same reason.

The Maytag recall has been a mess, resulting in requests for help from frustrated owners. Some are getting new dishwashers because the parts are on back order and not available. So far, I haven’t had any complaints about the GE recall.

Talking about dangerous appliances, I’ve helped a few owners of LG refrigerators that were leaking water all over the floor. (I bought that brand myself last year after an enthusiastic sales pitch.) This Korean manufacturer seems to provide spotty service and needs a lot of nudging to get complaints resolved. “Life’s Good” for LG owners? Not yet.

Insuring your life and your health

I’m doing a weekly series in the Sunday Star on insurance, which kicked off in mid-April. Readers tell me they don’t know much about insurance, even though they own a lot and buy it as part of other purchases (e.g. mortgages, credit cards, car leases). It’s hard to understand exactly what protection you’re getting in your policy. Even the person selling it to you may not understand it.

Along the way, I’ve been picking up horror stories about not having your claims paid out when you need the money. Perhaps you bought travel insurance thinking it would cover the cost of your trip if you had to leave early because of illness. Maybe yes, maybe no. See this column for details.

Perhaps you’re covered for medical and dental benefits under your employer’s plan. Did you realize you had to submit claims by a deadline (the end of the year or shortly afterward) or risk not getting paid? Did you know you could co-ordinate your work benefits with your spouse’s benefits and get more money? See this column for details.

Please tell me your stories about the insurance policies you’ve bought and whether you’ve made any claims. How were you treated? Did you get what you wanted? I plan to cover car insurance and homewner’s insurance, as well, in this series of weekly columns.

Bell can’t charge everyone a connection fee

The CRTC has blocked efforts by Canada’s big phone companies to pass on the costs of connection or reconnection too all customers, instead of just those who were moving.

Here’s what I wrote in the Star (Sept. 22, 2006) about this proposal:

Bell Canada charges $55 to connect a home phone line if you’re a new customer or if you move. But last month, Bell asked the CRTC for permission to eliminate the $55 hookup fee and raise the rates for all residential customers by 80 cents a month.

“This will bring us into line with other local phone service providers who do not apply one-time charges for such activities,” says Bell spokeswoman Jacqueline Michelis. Another benefit is keep local phone service affordable for those with lower incomes – students, young people, the elderly, the socially disadvantaged – who tend to move more often. Since subscribers move every 5.5 years on average, “the proposal will benefit a significant part of our customer base,” she said.

However, Bell was going to exclude people whose phones were disconnected for nonpayment. They would still pay a $55 fee for reconnection.

The Public Interest Advocacy Centre, which opposed the change, said polls showed most Canadians supported the user-pay formula for telephone pricing. Seven in 10 felt that installation charges for home phone service should be billed as a separate charge for those requiring the service.

“This change would have helped Bell, Telus and the rest have all their local customers pay for their efforts to win back customers that have switched elsewhere,” says PIAC counsel John Lawford after the CRTC announcement on June 1.