Personal Finance

The hunt for long-lost funds

How to track down money in old bank accounts

JULIE CAZZIN September 9 1996
Personal Finance

The hunt for long-lost funds

How to track down money in old bank accounts

JULIE CAZZIN September 9 1996

The hunt for long-lost funds

Personal Finance

How to track down money in old bank accounts

A tip from a friend and 30 seconds on the Internet was all it took for John Alderson to track down $15,000 in a long-forgotten bank account. Six months ago, the 53-year-old community college professor from Sault Ste. Marie, Ont., received a letter from an Alberta researcher who claimed to have located missing “assets” belonging to Alderson. The researcher offered to help him locate the funds in return for a one-third cut. Instead, a friend directed Alderson to an Internet service operated by an Oakville, Ont., company called Found Money International Inc. In less than a minute, and for a fee of only $10, Alderson located the missing money, which he had left in a London, Ont., bank after he and a business partner closed a small motel 20 years ago. Said a jubilant Alderson: “I put a new roof on the house and lent my son, Tim, $6,400 to help buy a new caremdash;interest free, of course.”

tí Alderson’s story is unusual, it is only because of the size of his forgotten bank balance. Each year in Canada, thousands of inactive accounts are turned over to the Bank of Canada after going unclaimed for nine years. Once in federal hands, the money earns 1.5-per-cent interest annually for 10 years, and nothing thereafter. There are now 950,000 such dormant accounts, holding a total of $142 million. Eight accounts hold more than $100,000.

Tracking down a dormant account is a rel-

atively straightforward procedure. Account holders can either contact the Bank of Canada directly or go through a private agency that will search the bank’s records on their behalf. For example, computer users who visit Found Money’s free site on the World Wide Web (http://www.foundmoney.com) can type in their names and find out in seconds if there are any dormant accounts listed under that name. If the computer finds a match, a call to the company’s 1-900 number is all it takes to find out the account number and bank branch, the holder’s last known address, the date of the last transaction and the balance. The charge, added to the caller’s telephone bill, is $9.95 for the first minute and $2.95 for each additional minute. (Calls typically take one to three minutes.)

Alternatively, the Bank of Canada will do searches at no cost. Last year, the bank received more than 17,000 such inquiries and helped to reunite 3,200 Canadians with a total of $4.4 million. ‘We get 200 inquiries a day,” says Rachel Robinson, the bank’s supervisor for unclaimed balances. ‘We have four people working in the department now. We used to have only one.” If a search is successful, the account holder can reclaim the | funds by obtaining a letter verifying his or lt; her signature from the bank branch that $ originally held the account. If the account z holder is deceased, the next of kin requires “ a death certificate and a certified copy of the § will to lay claim to the funds. 8

By contrast, chartered banks themselves often provide little help to those seeking forgotten funds. Banks are required by law to send out two letters to customers notifying them of inactive accounts, two and five years after the last transaction. After nine years, the account is automatically turned over to the Bank of Canada. Paul Howard, a spokesman for the Canadian Imperial Bank of Commerce, says the CIBC normally charges $30 an hour to look up old documents. But, Howard adds, “If we just have to punch a number into a terminal, then you probably won’t be charged.”

Three years ago, Hugh Dakin, 46, a mutual fund agent in Flin Flon, Man., found out just how difficult it can be to get banks to cooperate. While a student at the University of British Columbia in the 1970s, Dakin left $700 in a Vancouver branch of the Bank of Nova Scotia. Several times over the following years, Dakin asked a Winnipeg branch of the bank for assistance in trying to trace the money. “I had the account book from the Vancouver branch, but I didn’t get much help,” says Dakin.

John Alderson was one of the lucky ones. He got his money and plans to spend the remainder of his $15,000 on a trip to Tokyo next summer to visit his 23-year-old son, Christopher. The only sour note in his experience was the tax notice he received last May for the $1,000 in interest he had collected from the Bank of Canada. The federal government, it seems, is not as forgetful as some Canadians when it comes to getting what is owed to it.

JULIE CAZZIN

HIDDEN RICHES

Of the 950,000 dormant bank accounts that have been turned over to the federal government, most contain less than $100. A relative few, however, hold many times that figure.

Under $100: 70%

$100 to $199: 15%

$200 to $499: 10%

$500 to $999: 3%

$1,000 and over: 2%

Investment earnings as a percentage of total income* 1990 1991 1992 1993 1994 *for families in which at least one spouse is 65 or older

The flip side of cheaper money

In economics, every silver lining has a cloud. Why else would news of faster job growth throw the stock market into a tailspin? It turns out that the recent drop in interest rates also has a dark side: many of Canada’s seniors are struggling financially because of lower investment yields. According to Statistics Canada, families with one spouse 65 or older received 14 per cent of their income from investments in 1994, down from 25.5 per cent four years earlier. ‘We all have children and they’re benefiting from the lower rates,” says Lillian Morgenthau, president of the 240,000-member Canadian Association of Retired Persons. “But it’s catastrophic for most seniors.”

To make matters worse, many seniors have failed to benefit from the recent stock market boom. That is because older investors generally rely on safe, conservative instruments such as bonds and guaranteed investment certificates. In the early 1980s, when interest rates were above 15 per cent, GIC holders were sitting pretty. But today, GIC rates hover around four per cent. “Many older people are looking at the markets,” says Morgenthau. “But if you need something coming in every month, you’re not going to get it from stocks.”

All of which begs a question: what effect will lower rates have on the much-touted trillion-dollar rollover of seniors’ wealth to baby boomers? “Forget it,” says Morgenthau bluntly. “It’s not going to happen. Seniors are using it up. If they have to sell a house or a car to survive, there it goes.” And with rates likely to remain low for the foreseeable future, big asset sales may be unavoidable.

Internet securities

In the past year, the volume of information available on-line for investors has exploded, with Internet sites offering everything from annual reports to stock quotes. By far the biggest innovation, however, is the ability to trade securities over the World Wide Web—a service now available from at least a dozen U.S. brokerages. This fall, TorontoDominion Bank’s Green Line Investor Services plans to follow suit with the launch of a service it calls WebBroker. According to Green Line president John See, WebBroker will not only be the first such operation in Canada, it will also be one of the most secure Internet trading systems in existence.

Currently being tested on a small group of Green Line clients, WebBroker allows investors to send buy and sell orders directly from their computers, using a special password and identification number. Already, 30 per cent of the discount broker’s transactions are performed automatically by clients using the touch pads of their telephones or a computer with proprietary software that links to a Green Line broker. With the Inter-

net’s rising popularity, See says, “allowing people to trade on the Net just makes sense.” Moreover, See claims that WebBroker is virtually tamperproof, thanks to a multilayered security system based on the latest Netscape software. In technical terms, WebBroker uses a 128-bit encryption system compared with the 40-bit encryption used by most U.S. brokers. That extra speed and power allows Green Line to use a far more complicated coding system to safeguard client information. Explains See: ‘We think it is one of the most secure systems on the Internet.” Investors will no doubt be hoping he is right.

FORECAST:

ECONOMIC GROWTH The Canadian economy is poised to lift off in response to the latest easing by the Bank of Canada, says economist

Sherry Cooper of Nesbitt Burns inc. She estimates that recent interest rate cuts will save Canadians $5 billion over the next year. "That will boost consumer and business confidence and spur the economy to achieve threeto four-per-cent growth," Cooper predicts.