Repeating once again for even more emphasis: “Investment management excellence, world class service and guidance” (Positioning line at the top of the T. Rowe Price website)
By Bruce B. Brugmann (B3)
Five days after putting my pointed questions to a voice mail at the T. Rowe Price headquarters in Baltimore as to why the company was calling my wife an excessive trader of mutual funds, I got a call back from Ben Scherer, from the risk management team of T. Rowe Price Financial Institution Services, as he is called.
He was an affable chap with the air of a seasoned flak catcher out of Tom Wolfe's short story on mau-mauing the flakcatcher. He apologized for the troubles, and said that the person I had been calling at Price (on my own dime) had left the company three weeks before and that it was the fault of Charles Schwab for giving me her name and not giving me the Price 800 toll free number for answering questions and complaints. (I didn’t even ask why, if she were indeed gone, that there was not a message on her answering machine explaining that she was gone and who to call in her stead. I made five calls to her number.)
I asked Scherer why Price had told my wife, via a telephone call from a Schwab customer rep, that she (and I) could no longer invest in any Price funds because she had violated Price trading policy (unbeknownst to us) by selling a Price fund (quite modest) in her IRA account (quite modest) because Price had a six month hold on trading its funds. My wife had bought her Price fund in July and sold it in September, on advice of our financial advisory newsletter, and Schwab had not advised us of any hold policy. (The Schwab rep told me that Price is one of only a very few fund families that impose such penalties and restrictions and that this restrictive policy is difficult for Schwab to deal with. He said Schwab was working on a pop-up to let investors know of such restrictions, but it was not yet up and running.)
Where, I asked Scherer, did Price notify its customers of its penalties and restrictions? He said it was in the fund prospectus and could be viewed or pulled down from the Price website. He e-mailed to me under the ominous head "Excessive Trading Policy" a copy of the fund prospectus. And there it was, buried deep in the prospectus under the title “excessive trading policy,” a line that said “persons believed to be short-term traders may be barred for 90 calendar days or permanently from further purchases of Price funds…”
Let’s have a show of hands: how many investors would turn cryptographer and plow headlong into a prospectus to ferret out this nugget of legalese before investing? Let's have another show of hands: how many small investors, poring through a prospectus and running into the clunky head "Excessive Trading Policy," would stop and think it applied to them and try to figure out that it meant expulsion and banishment? Further: Price policy says “may” and so Price has the discretion of barring or not barring investors from further fund purchases. So I emailed Scherer and asked more questions: why had Price used its discretion to designate my wife and me, without real proper notice or warning, for expulsion and banishment? Why, with such a severe and unappealable penalty, did Price not work out proper notice with Schwab? Why did it not highlight the penalties at the top of its prospectus or at least in the table of contents or somewhere and instead bury it under mountains of legalese? Why, when confronted by annoyed customers, did it not budge and try to make amends and work to keep longtime customers? Why did it not take the occasion to display “investment management excellence and world class service and guidance?” The email back from Price, unsigned this time, read like boilerplate and avoided most of my questions and notched up the stonewall.
And so alas I must have a chat with my crazed short term and excessive trader wife and see what we should do: fire Price or start reading every prospectus, line by line, page by page, from top to bottom, before investing in any more Price funds with Charles Schwab.
P.S. Unsolicited advice: to Price, Schwab, and all investment advisors and advisory newsletters everywhere: if anybody is imposing severe penalties and talking expulsion and banishment and exile for small individual investors with modest accounts, please give them fair warning in advance. And please don't blame the victim when you get a complaint. B3