Shareholders Speak Out at the ICI’s ‘Shareholder First’ Conference

The opening session of the Investment Company Institute’s General Membership meeting in Washington, D.C., yesterday felt a lot like a reality TV show. The ICI broadcast video interviews of actual fund shareholders discussing their take on the industry, which has ballooned to $8 trillion in assets from 92 million shareholders.

The opening session of the Investment Company Institute’s General Membership meeting in Washington, D.C., yesterday felt a lot like a reality TV show. The ICI broadcast video interviews of actual fund shareholders discussing their take on the industry, which has ballooned to $8 trillion in assets from 92 million shareholders.

Guess what? The “reality” interviews played for the 1,400 assembled guests from the fund industry—the ICI represents more than 8,000 fund companies—showed that the investing public likes the mutual fund industry. They really do. (Some aren’t sure what to make of financial advisors, though.)

The ICI went out and asked the retail folks questions like: Why do you own mutual funds? How do you buy mutual funds? What do you think about the fees? What message do you have for fund managers?

The result of the 26 hours of one-on-one interviews of 25 men and women, ages 25 to 70, was boiled down into four five-minute segments, each segment addressing one question. Each question was then followed by a panel discussion of industry experts including moderator Warren Cormier, president of the Boston Research Group; Mark Casady, CEO of LPL Financial Services; Charles Haldeman Jr., CEO of Putnam Investments; and Michael Miller, managing director of The Vanguard Group.

“The sampling was qualitative in nature,” said Cormier. “And what we wanted to do was explore issues and look for different examples of patterns of investing.”

Big Nest Eggs

What the audience learned from those interviewed was that nearly all had six-figure fund nest eggs—one surpassed the $1 million mark—and came from all walks of life, including retirees, flight attendants, an engineer, an attorney and a young woman who inherited her wealth.

Most invested in mutual funds because they believed them to be “safe” and saw them as a way to create wealth over the long term. Some liked working with brokers and others didn’t; one young man thought fund companies were the ones who could be trusted.

While those who used brokers or advisors said that they didn’t feel comfortable managing their own money, almost all interviewed were confused about the fees funds charge.

“I’m confused about fees,” said a flight attendant with $50,000 invested in funds—she thought that her fund carried no fees. Another said she only invested in no-load funds. A third offered that fees were “very complicated” and “chip away at returns.” And another added, “On my mutual funds, there are no fees and no management fees.” Hearing this, the audience chuckled.

“It’s disturbing to hear that so many people don’t understand them because so much attention is focused on fees,” said Miller. There’s so much information out there, yet people are clearly confused.

Although these fund investors may be confused about fees—be they management or sales charges—they were clear about the messages they’d like to send to fund managers: The majority thought the fund industry was doing of good job of managing their money. Although, a few did mention the recent fund scandals and the negative impact it had on the industry.

As for ideas that they’d like to pass on to management, some younger interviewees thought that more marketing, education and outreach should be directed toward the young professional. But, it was a woman with $300,000 invested in funds who offered the best idea: “A crystal ball service would be wonderful,” she said.

The ICI 2005 General Membership Meeting, “Shareholders First,” runs through Friday, May 13 in Washington, D.C.

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