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Ask Your Investment Representative These Questions

Investment representatives may approach you to consider transferring your current United Methodist Personal Investment Plan (UMPIP) account balances to funds that they recommend. Frequently they'll tout better investment results as a reason to transfer your money. Before you do, the answers to these questions may help you make the most prudent decision regarding your retirement money.

Q. Are there any front-end loads that I must pay? A "front end load" is a sales commission and can be 6% or more. That means for every $100 you invest, only $94 will actually be invested in the fund-you lose 6% of your investment on the very first day. Any past investment performance results that a representative shows you will never include the effect of a load.

Q. What management fees does the fund charge? Does this include a 12(b)(1) fee? Every fund includes management and administration fees. These fees are deducted directly from the fund and range from 1% to as much as 3% each year. This means that for $100 invested in the fund, $1 to $3 are deducted to pay the fund's expenses. A 12(b)(1) fee can be used to pay for marketing and distribution expenses, such as compensating sales professionals. The annual fee is typically 25 cents for every $100 invested.

Q. Are there any redemption fees if I decide to move my money at a later date? Redemption fees are charged by the fund if you withdraw your investment before a specified number of years and can be as much as 5% of the account balance.

Q. Can you provide me with a record of what funds you recommended five years ago to clients with a profile similar to mine? Some fund representatives might "cherry pick" their best performing funds to promote to prospective investors. That's why it's important to know if the investment representative is recommending the same funds today that he or she recommended five years ago and how those funds are performing today. Also, find out the length of time the representative has been recommending his or her current fund selections. This will help you evaluate the investment representative's ability to select funds. More often than not, yesterday's winners are not tomorrow's winners. Consider this example. In 2000, many financial planners recommended the Janus Twenty Fund based on the performance record for the various periods ending December 31, 1999.

At the time, a financial planner recommending the Janus Twenty Fund might have reported to you that an investment of $100,000 on January 1, 1995 would have grown to approximately $645,000 in just five years. See how the fund actually performed from 2000 to 2002.

If you invested $100,000 in the Janus Twenty Fund on January 1, 2000 at the recommendation of a financial planner, your investment would have shrunk to approximately $36,000 at the end of 2002. It is unlikely that very many financial planners are recommending this today.

Four Important Things to Remember

When considering an important decision about where to invest hard-earned savings, investors should be mindful of the following suggestions:

1. Past performance is not a predictor of future results. Avoid making investment decisions solely on the basis of historical investment performance.
2. If considering the services of a financial planner, use the services of a fee-only planner and ensure that he or she is not compensated from the funds that you ultimately choose to invest in.
3. Fund expenses matter. Understand exactly what costs will be deducted from your account to pay sales commissions, fund management fees, or any other costs.
4. You should know that loads, expense ratios, and redemption fees must all be disclosed in a prospectus. Every fund representative is required to provide you with a prospectus before you invest. You should always read the prospectus and ask questions of your representative if there is anything in the prospectus that you don't understand.