Prepare to wade through mutual fund paperwork

Leo Berard wants more than just money from his mutual fund company and financial advisers.

The Cape Cod broker for homebuyers wants more information -- about all the little fees fund companies lard away in his accounts, about whether the adviser has any conflicts of interest -- and he wants it stated as clearly and plainly as possible.

''I don't have the fee information in a simple, understandable way I can use," Berard said. ''I would feel more comfortable if I had a feel for how the funds are managed and how efficient they are -- all the fees."

Berard should be careful what he wishes for. He and other mutual fund investors are about to get deluged with new information -- especially from mutual fund companies -- much of which may be just as indecipherable as the existing fund prospectuses that so many investors ignore.

As part of its crackdown on improper trading, conflicts of interest, and other transgressions, the Securities and Exchange Commission is ordering the financial industry to disclose a host of new information in various documents and reports to shareholders and regulators.

The SEC's approach is that ''disclosure is a cure for a lot of ills," said Erik Sirri, the agency's former chief economist who is now a finance professor at Babson College. The more a fund company has to disclose uncomfortable details about its business, the theory goes, the less likely it is to engage in unsavory behavior that pads its bottom line at the expense of investors.

Already the agency has required fund families to provide investors with more detailed information about fund expenses, more frequent listing of a fund's security holdings, and easier-to-understand graphics.

Other proposals under consideration would require fund companies to explain how they pay portfolio managers, and to disclose how much of their own money employees have invested in the company's mutual funds. Fund trustees would also have to give more detailed explanation of the reasons for approving contracts with fund managers and the fees those managers charge.

And for investors who buy funds through brokers, the SEC is proposing clear, easy-to-follow forms that would detail all the various costs of buying shares in a particular fund, and whether the broker has any conflict of interest -- such as higher commissions -- in recommending one fund over another.

But some financial specialists who have lobbied on behalf of consumers worry that the information dump could have the opposite effect; that rather than being better informed, investors will be so turned off by the additional mounds of material they'd have to wade through that they will pay even less attention to their funds. ''We need to look at where the informational burden lies, and right now we're putting a lot of duty on the investors" to decipher what the mutual fund companies send them, said Jon Dauphine, director of the Economic Security & Work project at AARP.

Still, Dauphine, Sirri and other financial specialists said that an enterprising investor will find jewels of information to mine from the new information the government is poised to require funds to disclose. Perhaps the most helpful, specialists said: Companies must disclose fund expenses in dollar terms, based on $1,000 invested.

This should allow investors to make a more accurate, though not exact, estimate of the expenses they incur in a fund. Previously companies expressed fund expenses in percentage terms, which served as a good shortcut to compare different funds on cost.

But now, having those expenses in dollar format should also make investors savvier buyers, since it becomes more obvious how much one fund costs in annual expenses versus a similar fund. ''You want to look for your fund to be competitive with other funds or even better than other funds when it comes to expenses," said Ken Janke, chairman of the National Association of Investors Corp.

For Leo Berard, it's a start -- but only a start. ''What I don't know are all of the other hidden costs allocated to that fund," he said. These could include ''soft dollars," in which funds pay brokerages higher trading commissions in exchange for free research, or other trading-related activities that directly or indirectly affect the prices of shares the fund is buying, which in turn can affect returns for investors such as Berard.

The SEC may soon have an answer for Berard. The agency has solicited comments about ways these transaction-related costs can be quantified and disclosed to investors, and SEC staff are reviewing them.

Fund companies now will have to report portfolio holdings quarterly, and summarize those holdings by industrial sectors or asset classes in an easy-to-view table or graphic format, as opposed to the harder-to-track list format many fund companies now use. Investors can quickly look to the table, for example, to see whether the fund is remaining true to its investment style, or is wandering in order to boost returns.

''The key here is the visual is very consumer-friendly, made to shout out to a consumer what's going on," said Jay Sternberg, a consultant for the AARP Economic Security & Work project. ''If you're looking for a stable blue-chip company fund, and suddenly its tech holdings go way up, and it's not Microsoft, that could cause that investor to rethink this fund."

Also investors can track the more frequent portfolio holdings reports over time to monitor whether portfolio managers are dumping losing stocks or tanking up on hot stocks at the end of each quarter to boost performance.

Knowing that investors -- or, more significantly, information services that track mutual funds such as Morningstar Inc. -- are watching, Janke said, might cause fund managers to run a tighter ship, and ''hopefully you will have less turnover" in portfolios, which could lower fund expenses or minimize capital gains.

Another proposal under consideration at the SEC would allow investors to better understand how much they would pay to buy funds from a broker or financial adviser, and how much that broker or adviser makes selling it. Brokers and advisers would be required to provide mutual-fund buyers with two sets of forms with this information, one before the investor makes the purchase decision, and one after to confirm the details of the sale.

''The purpose of the forms is to give you enough information so that you can understand what conflicts your broker and the firm have," the SEC said in a communication to investors on the proposal. ''That way, when a broker recommends a particular fund, you can assess with full knowledge whether the investment is better for you or for your broker."

The SEC has published model forms that would include information that can be used to compare the cost of a mutual fund purchase to industry norms. ''It tells you whether you overpaid your broker, as long as the industry norms are accurate," said Edward Crisci, of DCU Financial LLC, the Littleton-based investment and insurance arm of Digital Federal Credit Union. ''This is information investors need, and is understandable," Crisci said of the form.

While the sheer volume of information coming can intimidate even the hardiest of investors, Sirri and other specialists said it ultimately may become easy for investors to digest. The new material, they said, will likely be a boon for Morningstar, Lipper, and other services that will likely use their sophisticated tools to analyze the new data, and repackage it in simple, short form for investors.

Andrew Caffrey can be reached at caffrey@globe.com.