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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 is why it is 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.

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. Consider using the services of a financial planner for assistance in planning out your retirement needs, including future investment strategies. Be sure to ask whether that planner is being compensated from any funds in which you ultimately choose to invest. The General Board offers independent financial planning services at no charge through Ernst and Young.
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 do not understand.