Vigilance and Speed Can Fix Costly Errors

A woman from Boca Raton, Fla., did her research, picked her funds and mailed the forms to open an individual retirement account.

Just over a week later, she learned that half her money had been put in the wrong place.

Her statement from Excelsior Funds indicated that only half of the $2,000 investment had been deposited in accordance with her wishes. The other half was in Excelsior’s real estate fund, which was not one of her selections.

This is one of the rare cases of a fund account opened with an administrative blunder. (Technology has ensured that such problems don’t happen often.)

Typically, fund companies resolve disputes in a flash. They keep copies of account forms, record telephone instructions and have other backup systems designed to show what went wrong. Once uncovered, mistakes usually can be fixed in a heartbeat.

Many fund firms even fix your own mistakes. Fill in the wrong box on a form and they may set it right, as long as you notify them right away.

No matter who is at fault, errors must be corrected quickly. Procrastinate and you could wind up on the hook.

And in these days of Internet trading--considered mistake-proof since the customer enters the data himself--finding your own mistakes is of paramount importance.

“Open every confirmation and study it well,” says Randy Gore, a vice president at Kansas City, Mo.-based DST Systems Inc., a transfer agent processing customer accounts for many fund groups.

“The longer you wait, the harder things are to fix. Some statements even have notes on the back saying that if you don’t contact the fund within 30 days, the transaction stands.”

In any case, always keep copies of paperwork or records of phone transactions.

Before sending in an application, copy it. This way, if you contact the fund, each of you is looking at the same document.

Every time you make a telephone transaction, note the date, time, confirmation numbers for trades and who you spoke with.

Often you can solve a problem with the transfer agent, a company that works for many funds to handle transactions. But it’s the fund company itself that will turn somersaults to retain customers.

This could be particularly important if you are at fault, especially with online trades. Say you meant to withdraw $1,000 but keyed in $10,000. Some funds might allow you to fix the error--without tax consequences--as long as the extra funds were returned immediately.

“We don’t want any reasonable request from a customer to be turned down,” says Roderick Williams, head of sales and marketing for Excelsior. “No fund wants customers to go away unhappy and dissatisfied. No matter who is at fault, contact the fund to see if it will set things right.”

If the fund can’t help you but you think you’ve been wronged, contact the authorities.

Your state’s securities department, the National Assn. of Securities Dealers and the U.S. Securities and Exchange Commission take problems like these very seriously.

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Charles A. Jaffe is mutual funds columnist at the Boston Globe. He can be reached by e-mail at [email protected] or at the Boston Globe, Box 2378, Boston, MA 02107-2378.