Time to Create Shareholder Advocates Inside Mutual Fund Companies


    The proposal for creating Shareholder Advocate positions at the nation’s mutual fund companies is designed to correct the inherent conflicts-of-interests that exist between the fund company’s sales organization and its own customers.

    These conflicts of interest invariably are created when the inherent pressures to sell mutual funds clashes with the specific investment needs of an individual shareholder, including the need for the lowest possible total expense ratio, full disclosure of any hidden fees. and the necessity of receiving objective financial and investment advice.

    Are Shareholders Customers or Victims?

    To ensure the shareholder advocate’s independent authority, they should be empowered with the following:

    1. The consumer advocate should either report directly to the Board or have ready access to the Board.

    2. The advocate should not be an “at will” position.  Rather, the advocate should be hired for a minimum of four to five years in order to have the job tenure needed to accomplish the needed cultural and organizational change.

    3. Ideally, the advocate should be hired from outside the company.

    4. The advocate should have the guaranteed freedom to file complaints with regulatory agencies if s/he is stone-walled by the company.

    5. In the longer term, an independent body should establish a certification process for consumer advocates.  This independent body should be comprised of representatives from the financial services industry, consumer advocates and financial regulators.

    The original proposal for creating a shareholder advocate position was published in the “Other Voices” section of Barron’s on August 29, 2011 on page 45. The article is titled “Where Are the Customer’s Advocates?”

    Time for fund companies to create shareholder advocate positions

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    Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry. He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial. He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).


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