April 11, 2004
After reviewing your proposed forms I wondered if this would have have stopped us from purchasing several mutual funds during August 2000 from a financial advisor that got us to meet with her after she hosted an investment seminar. Our financial advisor suggested that instead of paying the front end load, we enter into a managed account with her for a 1 percent yearly fee. It is interesting that the funds she got us into are the same funds that have been in the news, Putnam, MFS and Van Wagoner. A year into working with our financial advisor, who stated she was dedicated to our account, I realized not only were we paying her 1 percent but we had expense fees with each of the mutual funds. Your proposed forms would have made us take notice that there are fees and what they are, something our financial advisor failed to share with us. It would also have been helpful to know that they stand to benefit more from selling a particular fund.
Your proposed forms should have the warning Ask Before You Buy at the top of the page. In addition to the fees and incentives, it should include a warning about past performace, inception date of the fund, turnover rate and risk. Our financial advisor showed us all the Morning Star reports that rated the funds a 5 but failed to tell us that most of the funds were started in the mid 1990s and how that related to the market at that time.
We actually believed that our financial advisor/certified financial planner/vice-president of investments had a fiduciary duty to her clients. We learned a very costly lesson that she was just a salesperson selling a product that was profitable to her and her company.