Put trust in the telephone, and invest down the line

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The Independent Culture
Tired of queuing for ages in your bank or having to put up with unwanted sales pitches from your financial adviser or stockbroker? You can put a stop to the time-wasting today, says David Prosser.

The market research analysts Datamonitor reckon that more than 30 per cent of people will bank by phone by 2000. What you get from using that type of service varies from bank to bank but most will allow you to order cheque books and statements, check your balance and pay bills by phone.

At First Direct (owned by Midland), a telephone-only bank, you talk to a member of staff and all the normal banking services are available.

Others, such as TSB's PhoneBank Express and NatWest's Primeline are automated - you manage your account with your phone's touch-tone keypad.

So far, though, using the phone has not offered any great cash savings compared to calling into your local branch of the bank. And then there is your phone bill to consider, even if most calls are charged at local rate. The banks admit phone banking is cheaper to run than a branch-based service but say they currently have to manage the two in tandem. The promise, though, is that in the future it may be cheaper to use the phone.

However, postal and telephone accounts often pay better rates of interest at banks and building societies. The Norwich & Peterborough Building Society, for instance, pays 5.95 per cent gross annual interest on balances of pounds 5,000 on its post and telephone based instant access accounts against the 3.05 per cent a year available at its branches.

Where you can really save money is by making investments over the phone. For example, try using discount brokers to buy unit and investment trusts. If you know which you want, you will find that there are normally some attractive savings to be made on initial fund charges. If you want advice on which funds to buy, you will have to pay more.

Take the popular Jupiter unit trust range. Buy the units over the phone through Hargreaves Lansdown of Bristol and you will pay a 1 per cent initial charge if the funds are to be held within a personal equity plan (PEP). That compares with the 5 per cent charge you would normally pay. Purchase them via The Pep Shop in Nottingham, and the initial charge for a Jupiter Pep falls to only 0.5 per cent.

Other examples include Pep Direct which makes a 0.25 per cent initial charge for Schroder's unit trusts, against its usual 3.25 per cent.

Admittedly, those large savings are available only to execution-only investors.

As with buying units, investors can make substantial savings by using the phone when it comes to execution-only share dealing. Many leading brokers offer discounts on their usual charges to people who are prepared to deal over the phone.

At NatWest Stockbrokers, for instance, a pounds 3,000 share deal made in one of NatWest's branches would cost pounds 45 in broking charges.The same transaction by telephone will cost pounds 30, however.

In fact, the cheapest brokers deal only by phone or post, in order to keep costs down. For a pounds 3,000 share deal done by telephone, Charles Schwab (formerly ShareLink) charges pounds 28.75p, at CaterDeal, you would pay pounds 25, while with Fidelity Stock- brokers it would cost pounds 30.

It is also worth noting a new service offered by an execution-only stockbroker, The Share Centre. Clients can use a premium-rate telephone line if they want the broker's opinion on any particular stocks. That is a more expensive way to deal but is remains much cheaper than paying a traditional stockbroker for advice.

The only real problem with using the phone for share dealing is that during very busy periods, you may have difficulty getting through to a broker. Charles Schwab has got round the problem with the launch of a touch tone dealing service which allows its customers to buy and sell shares without ever having to speak to a human operator.

Most of the services mentioned above are now available to a greater or lesser extent on the Internet. In fact, nearly all financial services companies are now examining ways of allowing customers to do more business through their computers, if they have them.

First Direct: 0800 2424242; Lloyds TSB 0171 626 1500; NatWest: 0171 920 5555; Hargreaves Lansdown: 0117 988 9880; Pep Direct: 0800 413186; The Pep Shop: 0115 982 5105; CaterDeal: 01708 742288; Charles Schwab 0121 200 2242; Fidelity Stockbrokers: 0800 222190; NatWest Stockbrokers: 0171 895 5955; The Share Centre: 0800 800008.