The harried funds act to eliminate back office slip-ups

Even when you know why a problem is happening, having to deal with it can be irritating. This was the case with Stephen P. Conway, president of Conway Financial Advisors of Boca Raton, Fla. He has become something of an instant expert on the problems some mutual funds are having in keeping up with the flood of paper work brought on by their success.

``I was trying to move some money out of my own account, not a client's account,'' he recalls. ``I called the fund last November and asked them to cash in my shares and send me a check. The check didn't come and didn't come.'' Despite many calls, he says, ``I didn't get it until January. Meanwhile, I missed a 10 percent jump in the market.''

Even connections didn't help. ``I know the president of the company,'' he says with a laugh.

Mr. Conway has had similar problems on occasion with some of his clients' fund accounts. It has reached the point, he says, that the service a fund gives is almost as important as its performance.

The boom in mutual fund sales and the proliferation of new funds get most of the blame for back office foul-ups that result in incorrect orders, lost checks, improperly typed numbers, delayed responses, and uninformed telephone representatives. While many funds are trying hard to fix these problems, shareholders still need to protect themselves with good records of the dates and amounts of all transactions.

In many cases, these problems do not originate at the fund itself, but with an outside transfer agent. These agents are usually divisions of large banks that may do everything from the initial contact with an investor who is asking for a prospectus to transferring money from one type of fund to sending out tax reports. Most of them do an excellent job, but even the best phone representatives can make mistakes.

Yet, how uninformed can a phone rep be who is supposed to be dealing with mutual funds every day?

Manuel Hernandez, president of Colonial Investor Service Center, the operations division of Colonial Management Associates in Boston, found out quickly when he joined the company in 1984. He called some of the people handling the phones at the outside transfer agent Colonial was using at the time.

``Some of them didn't even know what a mutual fund was,'' he recalls.

Colonial recently joined a growing list of funds that have brought most or all of their transfer and telephone operations ``in house.'' The list includes T. Rowe Price, Pioneer, Vanguard, and American Capital.

``We took all our shareholder telephone communications in-house,'' says Steven E. Norwitz, a vice-president at T. Rowe Price. ``We're still using [an outside] transfer agent, and they're doing a good job.'' But having the telephone reps at the Baltimore headquarters means they get constant training and updating on new funds or changes in any fund practices.

Whether or not a fund is having servicing problems, there are some things an investor should do, says Thomas Foley, a financial planner in Minneapolis.

``I take a photocopy of everything I send them,'' he says. ``In some cases where time is important, I use certified or registered mail. I also flag things. I put an extra little note on something and say, `This is different.' ''

At most funds, any transaction over the telephone -- selling shares, moving money from one fund to another, or wiring money to a bank account -- is tape-recorded as well as typed into a computer.

You may not be able to tape the transaction from your end, and that probably isn't necessary, but you can write down the exact date and time of the call, the type and amount of the transaction, and the name of the telephone representative. The rep may also give you a transaction number. Write that down, too.

Then, if there's a foul-up and the transfer isn't made or the check isn't sent, you'll have your own records to back up any claim or complaint.