Buy, hold and forget?

You may be rich—if only you could find those long-lost investments

 

Grauer's forgotten account grew to a five-figure sum over the course of 20 years PHOTOGRAPH BY BRIAN HOWELL

 

It’s not every day a stranger calls to say they’ve got a sum of money waiting for you to collect, and when it does happen, it’s almost certainly a scam. So when a woman from a Toronto investment firm phoned Cindy Grauer last year and told her she was eligible to reclaim a mutual fund account she didn’t even know existed, alarm bells went off. But after cautiously confirming her identity, Grauer learned both the caller—Alison Pettigrew, a customer relations manager from Front Street Capital—and the fund—a straggler left over from a 20-year-old investment account—were for real. Then came the stunner. “Are you sitting down?” Pettigrew asked. After two decades orphaned on Bay Street, Grauer’s small initial investment had exploded to a healthy five-figure sum. “It’s like winning the lottery,” she says. “But how could something like this happen? It’s outrageous.”

It’s one thing to pursue a buy-and-hold investment strategy, but it’s not supposed to be buy, hold and forget. Yet over the decades many Canadians have lost track of some of their investment assets, whether through negligence or simple absentmindedness, a risk that’s likely to increase with an aging population. But while no one knows how much is sitting unclaimed in mutual funds, stocks, bonds and RRSPs—millions? billions?—there’s no easy way for investors to hunt down their forlorn funds. Nor do government and industry show any interest in doing much about it.

Grauer’s case shows how easily investments can go astray. In the 1980s she had a brokerage account with Pemberton Securities, which she closed at the end of the decade and moved elsewhere. But in the transfer, Pemberton overlooked one mutual fund. The firm was later acquired by Dominion Securities, which in turn was bought by Royal Bank. Front Street, meanwhile, took over management of the fund in 1999.

While Grauer’s account ping-ponged through these takeovers and mergers, it also flourished. Under Front Street’s management, the fund enjoyed average annual returns of 22.9 per cent over the last decade. Yet Grauer might never have learned of her windfall were it not for Pettigrew’s persistence, says the firm’s CEO Gary Selke. Pettigrew made it a personal project to reunite some early investors with their accounts, a task involving hundreds of phone calls. In one case an investor learned of an account worth more than $250,000.

Unfortunately, Pettigrew’s persistence appears unique in the industry. Which is why some, including Grauer, a Vancouver management consultant, believe there should be a national database of unclaimed investment accounts. The Bank of Canada already operates an online system that allows individuals to search through $351 million of unclaimed bank balances for their cash. But investments aren’t included. “I just assumed the Bank of Canada’s site captured investment funds,” says Susan Eng at CARP, a group that represents older Canadians. “At the very least we ought to have a default place where you can try to find your money.”

Easier said than done. Nailing down who would handle such a system triggers a head-spinning round of pass-the-buck. The Department of Finance refers questions to provincial securities regulators, who in turn say it’s a problem for the industry. Industry groups like the Investment Funds Institute say they’ll help individuals search for old investments on a case by case basis, but that it’s really up to the provincial governments. Banks will also hunt down unclaimed accounts if investors contact them, but the problem with this approach is the industry has undergone intense consolidation, and investors may have no idea where to start looking.

One possible organization seen to have the resources to operate a national database is the Investment Industry Regulatory Organization of Canada, the brokerage industry’s self-governing body. But Warren Funt, vice-president for Western Canada, says there are “significant hurdles” to such a database. For one, the IIROC oversees 200 investment dealers, and not firms like mutual fund dealers, portfolio managers and others governed by the rest of Canada’s smorgasbord of watchdogs. Unclaimed investment assets are also more complicated to handle than bank balances. “It’s a worthy objective, but I’m not sure it can practically be done,” he says.

In recent years B.C., Quebec and Alberta have passed unclaimed asset laws. (No such laws exist in Ontario.) B.C.’s Unclaimed Property Society, established in 2003, has a searchable database that includes old credit union accounts, unpaid wages and insurance payments. A spokeswoman says the society would handle investment accounts, but relies on firms to notify it of unclaimed assets. Since its launch, no investment funds have been sent its way. Nor is there a penalty should firms fail to flag unclaimed accounts.

Grauer can’t help wondering just how many other Canadians could be losing out on a chunk of their nest egg. “These companies could be sitting on a ton of money people don’t know about and collecting fees on it.” At the very least, it’s prompted her to dig around for any other stray accounts she may have. “I haven’t found anything else yet, but hope springs eternal.”




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Buy, hold and forget?

  1. Isn't Cindy Grauer fortunate that Alison Pettigrew of Front Street Capital,showed corporate social responsibility.She took the time to
    find Cindy and give her this excellent news.Sadly many of the huge investment factories only provide generic information and have little interest in the smaller investment portfolios.
    Yes investors should be able to find out about their forgotten accounts.
    It is the institutions and not the government that need to provide the information.

  2. You can also check http://www.unclaimedpropertybc.ca for forgotten accounts, unpaid wages and more. It's a BC agency that then donates a certain percentage of unclaimed funds to Vancouver Foundation.

  3. I have a web site where I give investment advise on penny stocks and stocks under five dollars. I think that its great that the woman found here mutual fund after twenty years. whats not so great is if the account was a taxable account not a roth or IRA account I would not want to be liable for twenty years of unpaid taxes plus interest and penalties and remember ignorance is no reason for not paying your taxes as far as the IRS is concerned.

  4. Buy and hold is dead. I hold 21 stock positions, and only one is good enough to be called buy and hold and owned it for more than 5 years. Buy and hold only works in stable economies with stable currencies and we currently have neither.

    If a companies financial change, so do I. If you don’t pay daddy or look like you can’t, sell-sell-sell.

    Its also why I believe pensions too should be in a persons name/account/control. How many have pensions from 20-30 years ago and companies are gone? Or like Nortel that shafted its disabled and retired?

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