News & Commentary

A WORD ABOUT MUTUAL FUNDS . . .

From its beginnings in the mid-1920's, the mutual fund industry has grown to reflect the enormous wealth of the domestic and international economy. Currently, there are over 8,000 different funds holding assets in excess of six trillion dollars.

For Investors' Security Trust Company to meet its obligation to you, one of our primary objectives is the prompt and efficient transfer of assets to your account. In today's world of electronic transfers, the movement of cash, stocks and bonds from one financial institution to another is typically a quick and orderly process. The one notable exception is the transfer of mutual funds. Unfortunately, the transfer of mutual funds can take as long as two months or more.

The reason is there are no mandated time standards within the industry or regulations set by the Securities and Exchange Commission to complete transfers. And because the transfer process is for the most part an unprofitable clerical function, mutual fund companies do not make transfers a priority in their daily operations. The problem is compounded when a third party broker; e.g. Smith Barney or Morgan Stanley holds your mutual fund. In these situations, both the broker and the mutual fund company are involved in the transfer process. We do not see this problem improving any time soon.

One solution is to simply sell the fund and deposit the cash proceeds to your new Investors' Security Trust Company account. In theory, this is an ideal remedy. But before we suggest this as the best course of action, we must gain an understanding of the tax consequences of the sale as well as the sales charges (if any) imposed by the fund. In most cases, it makes sense to transfer your mutual funds to your Investors' Security Trust Company account and then offer our services and guidance for your entire portfolio.

In the event your account retains or acquires a mutual fund, we do not utilize dividend reinvestment plans (DRPS).

While we understand and share your desire to complete the asset transfer process as quickly as possible, we want our clients to be aware of the unique nature of mutual funds and the inherent problems in effecting transfers. Please know we make every effort to speed the process along and keep you informed of our progress.

Thank you for your understanding and for allowing us to be of service.