Money: Fund manager not measuring up? Here's what you can do

By PHILIP MACALISTER

What can you do if you have a complaint about a fund manager?

In their investment statement a fund manager is required to provide information on how to make a complaint. The first port of call is, in fact, the manager itself.

Securities Commission chief executive John Farrell says the majority of complaints made to fund managers relate to either simple input/processing errors, concerns about investment performance, or the result of investor misunderstanding.

"Common misunderstandings by investors include a belief that the management fee is related to returns generated rather than funds under management, a failure to understand that their investment may go down in value, and a lack of knowledge of how to claim imputation credits."

There have been a number of complaints about fixed-interest funds losing value as people are under the mistaken belief that a bond fund cannot go backwards.

The reality is that once interest rates start rising, as they have done over the past year or so, managers take capital losses on their investments.

If you cannot get a satisfactory outcome by complaining to the manager there are a number of other options.

The bad news about this process is that the small investor has to take on the manager to get a result. The good news is that if the two parties cannot reach an agreement the investor can take the matter to one of two ombudsmen (both of whom are in fact women).

One is Karen Stevens, the Insurance and Savings Ombudsman, and the other is Liz Brown, the Banking Ombudsman.

The system generally appears to work well. However, there are some restrictions on what they can do. For instance the ombudsmen can only deal with complaints about products issued by their members.

Also, the offices are limited in their jurisdictions and can handle complaints only up to $100,000.

The other downfall of the system is that some superannuation schemes are not covered by these schemes. If you have a complaint which cannot be dealt with by the ombudsmen or is beyond the scope of their mandate the choices can include going to the Securities Commission (however its range of interest is limited to securities law). After that it is either court (expensive) or a media outlet like Fair Go.

To contact the Banking Ombudsman either: write to PO Box 10-573, Wellington; Fax (04) 471 0548; or phone (toll free) 0800 805 950.

If you wish to complain to the Insurance and Savings Ombudsman (ISO) either: write to Insurance and Savings Ombudsman, PO Box 10-845, Wellington; phone 0800 888202, or e-mail iombudsman@clear.net.nz.

Both services are free. Before going to an ombudsman you must first of all have used the bank, insurance company or savings organisation's internal complaints procedure.

* Philip Macalister is the editor of online money management magazine Good Returns.