Money Talks, Especially When It Comes to Fund Perks

Tired of talking to a nameless, faceless and possibly inexperienced phone rep every time you call your mutual fund company?

You can do a lot better these days. In fact, at T. Rowe Price, you can get your own personal service representative.

At Neuberger Berman, an individual advisor will help you select an entire portfolio of funds just for you. At Fidelity Investments, they’ll even arrange to waive the $75 fee on an American Express gold card for you.

The catch in each case: Just keep a big chunk of your money invested with the firm--at least $100,000, sometimes more.

Yes, membership has its privileges, and so does good old-fashioned wealth. Which is what well-to-do mutual fund investors--and even those who don’t consider themselves rich but have simply reaped the rewards of the ‘90s stock bull market and company-matched 401(k) savings plans--are finding out.

As the fund industry rapidly matures, fund companies that built their reputations helping the “little guy� invest are turning their attention to retaining and recruiting the affluent.

That’s where the profits are. And that’s the market segment that mutual fund firms are most vulnerable to losing to competing financial services firms.

And let’s face it, with more than 10,000 funds out there, fund companies can no longer distinguish themselves based solely on their products. Service is becoming a key marketing tool.

“Companies are starting to focus more on consumers and less on products,� says William White, practice leader for the Spectrem Group’s affluent market consulting unit.

The upshot is that it’s now a buyer’s market as far as the financially well-off and fund companies are concerned.

How good are the services offered? That’s still an open question, given the newness of many fund companies’ programs and the enhancements they’ve added. But if you’re shopping around, here’s some of what you can find:

* Fidelity Investments: For several years, the fund giant has offered “premium services� for investors with $500,000 or more in Fidelity funds and/or its discount brokerage.

In July, however, Fidelity launched “preferred services� to cater to the less-well-to-do--those with at least $100,000 at Fidelity.

Preferred-services clients can get a personal investment review, where a Fidelity representative works with you to evaluate your current holdings relative to what might be an appropriate asset mix.

In addition, preferred-services clients get a bevy of perks. For instance, they move to the top of the phone queue whenever they call Fidelity. They also get invited to seminars and events that Fidelity sponsors throughout the country, and access to Fidelity specialists in areas such as annuities, retirement planning and wealth management. A free American Express gold card also is available.

Evelyn Somers, senior vice president in Fidelity’s personal investments and brokerage unit, notes that about 20% of Fidelity’s customers, or 600,000 to 700,000 clients, qualify for this service. About 200,000 have enrolled, she said.

The more elite premium-services clients get all of the above, and more. For instance, instead of getting moved up the phone queue, they get access to a special group of 12 to 15 experienced reps trained to cater to their needs.

Anyone with more than $200,000 invested at Fidelity also gets access to its mutual fund “wrap� program. Wrap accounts are portfolios of funds or individual securities that are professionally managed to suit an investor’s needs. In exchange, the investor pays an all-inclusive, or “wrapped� asset-based fee.

Fidelity will manage portfolios made up exclusively of Fidelity funds, or a blended portfolio of Fidelity and other companies’ funds. The annual fees start at 1% of assets, but slide as low as 0.25% depending on how much you invest.

But some experts are critical of such wrap programs, noting that you pay the management fee on top of fees charged by the individual funds.

* Vanguard Group: A million dollars with Vanguard gets you into its “Flagship� services program, in which you get your own individual account administrator.

“People who have made that commitment to Vanguard we feel deserve that kind of attention,� says Rich Stevens, a principal with Vanguard’s personal financial services unit.

With $250,000, you can enroll in Vanguard’s “Voyager� program. You don’t get an individual rep, but phone access to a team of five.

Flagship and Voyager clients also are privy to personal financial information and advice, ranging from estate planning to the personalized pros and cons of converting your traditional IRA to a Roth.

And depending on how much money they have to invest, Flagship and Voyager clients have access to two money-management programs Vanguard runs.

For Flagship clients with $2 million or more, Vanguard will manage a personalized portfolio of funds and individual securities.

However, Vanguard managers won’t buy individual stocks for clients--just mutual funds. But if you approach Vanguard with an existing portfolio of individual stocks, its managers will decide which individual securities to hold and which to sell.

For Voyager clients with at least $500,000 to invest, Vanguard will help manage a personal portfolio through its “non-discretionary� program. That means the company will simply recommend which investments you should buy, sell or hold. The final decisions are up to you.

Management fees run from 0.5% of assets down to just 0.1% a year.

* Strong Funds: The Milwaukee-based fund company offers two programs for high-net-worth clients.

The first is called Strong Advisor. If you can afford to invest $100,000, you can participate in this fund wrap program.

After a question-and-answer process, an investment counselor will determine your risk tolerance, time horizon and income and growth needs. Then, he or she will construct a portfolio of five to eight funds offered through Strong’s “Prime Managers� program, a small mutual fund supermarket of Strong and other companies’ funds.

The asset-based fees for the wrap program start at 1% a year and go down to 0.65%, based on invested assets.

For those who don’t want money management, but do want added service, Strong also runs a preferred-clients service. Individuals with $250,000 invested at Strong get access to a smaller and more experienced group of phone reps than do less-well-off clients. Also, certain transaction fees are waived for this group.

* Charles Schwab: Schwab, which runs one of the country’s biggest fund supermarkets, offers three levels of perks for high-net-worth clients.

Investors with $100,000 at Schwab qualify for Signature Services. They get priority phone service through a special 800 number and receive exclusive access to online research tools and information, including research from Standard & Poor’s, First Call, Vickers, Argus and Market Guide.

Schwab customers with $500,000 or more qualify for Signature Gold. They get access to a smaller team of dedicated brokers. They also can speak with Schwab specialists in areas ranging from bonds to global investing to estate planning.

In addition to online access to research, those clients also receive breaking news via Reuters, Dow Jones and Bloomberg.

One million dollars will get you into the Signature Platinum program. In addition to what Signature Gold and Signature Services customers get, Schwab says Platinum clients get personalized service from an even smaller team of investment specialists, access to conference calls and online discussions with industry leaders and enhanced research. They can also extend their benefits to immediate family members.

* Neuberger Berman: “What people really want is advice,� says Stan Egener, president of Neuberger Berman Management in New York. That’s the basis of the Fund Advisory Service program that Neuberger Berman recently launched for clients with at least $100,000 to invest.

For an annual asset-based fee of 0.5%, you’re assigned your own investment advisor, who will help you determine an appropriate asset allocation. The advisor helps you find the right funds to fulfill those allocations--based on a recommended list that includes, but is not limited to, Neuberger Berman funds.

But Neuberger Berman advisors simply recommend additions to or deletions from your portfolio. You have final say on what to do.

* American Century: If you invest $100,000 or more combined through American Century’s funds, brokerage and other accounts, you can become a “priority� investor.

That gives you access to a special 800 number manned by a smaller, select group of phone reps who can offer personalized care, the company says.

In addition, you get a newsletter called “Priority Update� that addresses basic investment and planning topics. And some initial minimum requirements for investing in individual funds, as well as custodial fees, are waived.

American Century also will in some cases get priority clients access to new products that others don’t have. For instance, only priority investors can invest in American Century New Opportunities fund, a 2 1/2-year-old fund that invests in small growth stocks.

About 90,000 investors have so far enrolled in the program, the company says.

* T. Rowe Price: $250,000 qualifies you for your own “Personal Services� representative--an individual who will help you with such issues as retirement accounts and brokerage services.

High-net-worth investors also get some freebies. Three times a year, they receive educational publications that touch on various topics, including estate planning and financial planning.

And four times a year they get audiotapes of interviews with T. Rowe Price fund managers.

*

Times staff writer Paul J. Lim can be reached at [email protected].

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What the ‘Preferred Customer’ Wants

As Americans’ investable assets rise, so does their perceived need for personal financial advice, surveys show. But relatively few Americans think of mutual fund companies first when looking for advice--a problem the fund companies are trying to change with new services for the affluent.

Percent of investors who think they need personal financial advice*:

$100,000 or more to invest: 89%

$10,000 to $100,000 to invest: 69%

Less than $10,000 to invest: 21%

*

Favorite sources of advice among high-net-worth investors**:

Stockbroker: 60%

Financial planner: 42%

Accountant: 36%

Mutual fund company: 27%

Insurance agent: 25%

Banker: 24%

*1996 survey data

**1998 survey data

Note: High-net-worth investors are defined here as those with investable assets of $100,000 or more, not counting the value of their principal residence. Percentages do not total 100 because respondents were allowed to choose more than one category.

Source: Dalbar Inc.