Mutual Funds Expand Phone Rooms to Cope

Rising tide of customers has prompted more sophisticated service

FROM the supervisor's podium the clustered gray cubicles resemble a three dimensional crossword puzzle. In each square, a head bobs and fingers tap on a keyboard as representatives respond to calls from shareholders and brokers.

Putnam Investments' 200 reps, many of them young graduates tackling their first job, work in a palpable atmosphere of silence. No phones ring in this ``phone room.''

Boston-based Fidelity Investments operates on a larger scale, spreading its 2,500 reps across four cities to field sales calls and serve customers.

For both companies the phone room is their door to the world outside. And for many large mutual fund houses, it has gained in importance and size. Expanding to accommodate the tidal flow of new customers and to provide faster, more polished service, it has become the nerve-center and main development area of the company.

``The most important part of our business is answering the phone when our clients are calling,'' says Jennifer Schaeffner, branch manager for Fidelity's Back Bay office.

One indication of this new emphasis on customer service is the willingness of senior management to pitch in if phone volume suddenly spikes during the day.

When callers find themselves hanging on the line for more than 20 seconds, a corporate reserve force suddenly springs into action. Ranging from secretaries to presidents, all trained as registered reps, the reserves can man phones at a moment's notice.

At Putnam, if a customer calls during a rare ``level-five emergency,'' he might find himself talking to Dennis Nelson, senior vice president of investor services.

Such attention to service was not always the case. In the '70s, when mutual funds were a less-known investment option to the man in the street, selling shares for many companies was a backroom operation, paper intensive and poorly regulated.

Now, using state-of-the-art technology and highly trained reps, these larger fund houses are showing new sophistication.

The explosion in mutual fund sales has been the driving force. With sales volume breaking records almost monthly and new mutual funds rolling off the production line weekly, demand shows no sign of slackening. Mutual fund assets soared to $1.913 trillion in September, up 41 percent from $1.35 trillion at the end of 1991, according to the Investment Company Institute in Washington, a mutual fund industry trade group.

Fidelity Investments, the largest fund group in the country, has seen a 50-percent increase in calls since last year. It now fields 265,000 calls a day.

Automation has eased the burden. Of those quarter of a million calls, two-thirds are completed electronically. Customers listen to menus and then use PIN numbers to access account information and make transactions.

Shareholder surveys confirm these mutual fund companies are on the right track. Although a fund's performance still largely dictates where investors place their money, being able to talk to competent representatives, slide money between funds, and get cost-basis accounting for tax returns runs a close second in importance, industry observers say.

``In another five years, mutual fund companies that don't tell customers what to put on the tax form will lose customers,'' says Louis Harvey, president of Dalbar, which monitors service quality of mutual fund companies.

Cost-basis accounting, offered by Putnam and Oppenheimer and on the drawing board for Fidelity, is just the latest in a line of new services to woo the customer.

The next step will be to calculate each customer's personal investment performance rather than just fund performance, Mr. Harvey says. Something ``the public screams for from our surveys,'' he says.

But the number-crunching capacity needed for such individualized performance reviews is beyond the industry's technology at the moment, Putnam's Mr. Nelson concedes.

More immediate concerns are to simplify prospectuses, drop jargon, and explain terminology, Nelson says. ``Our biggest concern is an ignorant investor.''

Congress apparently agrees. New legislation to regulate sales and marketing practises have been drafted to help prevent confusion and abuse. Among other things, the bill would impose more uniform and informative advertising standards on mutual funds.

One element that consistently raises the ire of industry insiders, however, is the government's insistence on drumming on mutual fund risk. Unlike bank accounts and certificates of deposits, mutual funds are not FDIC insured and a shareholder can lose money.

``Once again the federal government has demonstrated how much they can miss the point,'' Harvey says. ``The notion that the consuming public is unaware of risk or can't tell the difference between an insured deposit and an uninsured mutual fund, I think is ludicrous.'' Harvey holds that the focus should be on what happens to the money after it is collected rather than on the consumer transaction itself.