What a Load
My girlfriend is rather particular. Detail-oriented. Possessed of high standards. Those who know her probably have their own terms to characterize this quality (and why she’s with me, in spite of these traits, is anyone’s guess). She is particularly attentive to paperwork: receipts, product manuals, advisory notices. Anything that arrives in her mailbox receives her full attention. Among the most heavily scrutinized documents are, appropriately, the financial ones.
Several years ago, an unsuspecting agent of Edward Jones solicited and won her business as a financial advisor. She had just sold a condo and was sitting on a pile of money, and, having been ill-advised by a “high-growth, high-risk, never sell” broker during the Bull Market days, was interested in pursuing a more conservative investment plan. Since that’s Edward Jones’s specialty, it must have seemed like a slam dunk. And so it happened that this poor man – a rather unassuming fellow – who thought he was adopting a puppy, instead discovered he had brought home a wolverine.
Full grown. Hungry. Not housebroken.
Let us say that even if he had no other clients, he would be earning his salary on this account.
Recently, she opened a ROTH-IRA and purchased some Mutual Fund shares. Now some funds have what they call different classes of shares, offering different rates of return and a different fee structure. Funds with a “load” charge a percentage of the buy-in price, but offer a better yield over time. “No load” funds are cheaper to invest in, but don’t distribute as great a percentage of the profits. Or something like that. (This, by the way, fully and completely exhausts my knowledge of the subject of Mutual Funds, and may be wrong to boot.)
Anyway, the concept of “loaded funds” was apparently not one which my girlfriend was fully acquainted with… until she received the statement for her transaction, which included not only the typical $30 fee, but also a surcharge of 4.99% deducted from the amount she had invested.
Joy no doubt gripped the Edward Jones office as the broker had yet another opportunity to display his customer relationship management skills. From the outcome, it sounds like he ranked somewhere between the utility company representative who had to explain why the charges on the water bill were higher than the meter reading (they used an estimate), and the waiter at the Mexican restaurant who delivered the bad news that there was no more nonfat sour cream. So, having just discovered the difference between Class A and Class C fund, my girlfriend is now exploring the application of the concept of “rollover.”
And good for her. If there’s something she doesn’t understand, she should call up and ask. And if she doesn’t like the answer, she should take her business elsewhere.
Now I generally imagine my girlfriend to be at the far end of the bell curve on such things. A unique specimen. A special case. But I allow that my own vantage point may be distorted because of where I sit on the curve myself. I’m what you’d call a “big idea” person. A generalist. Some would say I am perhaps more casual about details.
So let’s say that in this country of 300 million, there are, oh, 10-15 million of similar temperament to this fair angel who has captured my heart. This is possible, as she is related to at least a dozen more that I know of.
Think for a moment about providing all these people with personal managed retirement accounts, provided by private investment firms at dramatically reduced service costs (either made up for by volume or subsidized by the public). Do you know what the software industry pays out, in billions, per year to handle inbound calls from pissed off and frustrated customers? Amazon would have been profitable by 1999 (rather than 2003) had it not been for customer service costs. And faulty software is just annoying – it’s not your retirement nest egg.
Social Security probably fields its share of calls from cranky seniors too, and it probably isn’t cheap. But that’s Social Security’s main mission. It’s also one agency, centrally managed and staffed, that can (in theory, at least) drive consistency in its practices so that everyone who calls gets information out of the same system.
Chase Morgan Stanley, Fidelity, CSFB, Bank of America and the other big investment houses who think that privatization is going to be feeding time at the trough might soon find out that, in the words of Spider-Man, “with great power comes great responsibility.” If the prosperity of America’s retired workers is placed on their shoulders, they may discover that, before long, they become giant customer service call centers with a side business in banking and investment.
Private businesses know that a comparative few troublesome customers can chew up scads of customer service resources. Most firms are, at the end of the day, happy to absorb the lost revenues of high-maintenance customers who abandon their service. But firms engaged by the government to manage private accounts will be unlikely to be allowed to pick and choose their customers. And if their management costs are kept low by government decree, the gruel in the trough might turn out to be thin meal indeed.
Some people think I’m some kind of socialist, but I’m actually a very big fan of the free market. For most things, it’s the best way to allocate resources and assign value. There are a few areas where the market doesn’t work very well: providing education and health care for low-income people, for example. If there’s no money there, the market won’t touch it, even if the services are required. Managing pensions en masse for the totality of the American workforce may be another such area.
It would behoove the advocates of such a plan to take a page from my girlfriend’s book and read the fine print before signing up, because it will be too late to complain later.
2:31:10 PM 
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