Pros and cons of phone-alone
The range and choice of financial services available over the wires continues to grow, but Steve Lodge warns there can be drawbacks
Sunday 29 October 1995
All and more are available to phone-friendly people. This week's announcement by the Prudential, the UK's largest life insurer, that it plans to set up a telephone bank next year to offer savings accounts and mortgages is just the latest among a growing line of financial organisations queuing up at the convenience of their customers.
For consumers, the main attraction of these telephone services is the ability to sort out things financial instantly without having to visit branches or meet sales people - and outside traditional business hours, too.
First Direct, which started up telephone banking, says it was inspired by customers' deep-rooted frustrations with branch-based banking - the all-too familiar queuing, for one.
Cost is the other much-cited attraction. The "direct" nature of these operations - the lack of branches or middle men - means the companies have been able to pass on significant cost savings on many products and services.
Our table shows the four best-known examples of telephone services across the financial spectrum. Direct Line was the real pioneer. It launched 10 years ago and can fairly claim to have transformed the buying of motor insurance. With more than 2 million policyholders, it is now the biggest motor insurer in the UK. Direct Line says callers can be insured within minutes. It admits that some brokers will now say they will beat whatever price Direct Line quotes, but it says this is "silly pricing" that will not last long.
First Direct claims the most comprehensive telephone banking service available - account holders can check balances, pay bills, transfer money and order chequebooks at any time, day or night; mortgages, investments and pensions can be arranged over the phone, too. Account holders can also freely use the Midland branch network for paying in money. Any cashpoint machine available to Midland customers (which includes those of the NatWest) can be used for getting cash.
Chief executive Kevin Newman says the aim is to be among the best in price. But he admits that on current accounts, for example, "there is less need to be competitive". And its investment products have never stood out as offering particularly good value. At present, the bank is tempting people to open an account with a gift of pounds 15 cash.
Richard Branson's Virgin Direct, launched earlier this year, is the new investment kid on the block. It currently offers two tax-free PEPs - one that invests in shares, the other offering a higher income from bonds - both of which it says are the cheapest around. You ring in, they send you some bumpf and will call you back a week later.
ShareLink is the largest no-advice stockbroker in the UK. While shares can only be bought and sold when the stock market is actually open, ShareLink's longer opening hours mean that orders can be placed even at weekends. Initially, ShareLink was known for price. But with a minimum commission of pounds 10 and a maximum of pounds 50, the company now readily admits it is not the cheapest. However, it emphasises its range of services to DIY investors. In 1996, it plans to open the first of a network of investment centres to offer visitors information on companies and their shares and dealing services for home computers.
Competitive pricing from these innovators has led others to cut prices, set up copycat operations and improve services. However, there also has been a growth in what John Wriglesworth of the Bradford & Bingley building society calls "fake phone-alone services", where customers get convenience but not cheaper prices. He contrasts his own society's Mortgages Direct service, which offers cheaper mortgages than through B&B branches, with those of some other lenders, where the deals are no better. Do not assume telephone operators - however strongly branded - will automatically offer the best deal.
Other limitations and potential shortcomings to watch out for with such services include:
q Lack of advice. Virgin, for example, has made great play about not paying commission to financial advisers. Fine, but equally it does not give advice as to the suitability of a PEP as an investment. The concern is that these and more complicated investment products - particularly pensions - which are even more important to your financial well-being, might be bought without an investor knowing what he is doing.
q Time and cost. Most companies do their utmost to reduce telephone time, but typically you will still pay for at least a local-rate call. Some complex financial transactions can take perhaps half an hour.
q Access. Direct Line claims callers will get through in seconds. But remembering passwords in the wee hours to make a banking transaction can be difficult.
q Security. Recently a user of the Co-operative Bank's Armchair Account telephone service proved that someone might be able to get past security checks and access an account even without full knowledge of the account holder's "passwords".
POPULAR PHONE FINANCE
Company Number Opening Current Future
of users hours services
Direct Line 2.5 million 8-8 Motor insurance, Savings account
(9-5 Sat) mortgages, personal (later this year),
loans, home and investments
First Direct 500,000 24 hours Full range of banking Corporate bond
7 days and financial services PEP, other
Virgin Direct 20,000 8-10 PEPs and unit trusts Pensions and
7 days life insurance
ShareLink 600,000 8-8.30 Buying and selling Adding 'branch'
(9-2 Sat) shares, PEPs network - an
(11-4 Sun) investment
centre in London
(open early '96
Government's Pension Wise guidance service is up and running
Bargain Hunter: BT improves its mobile reception with 'incredibly competitive' deals
Mark Dampier: What price equities when cost cutting does nothing for profits?
Questions of Cash: Why was my case ignored by My Civil Service Pension?
Offset your mortgage and save thousands
- 2 The West has it totally wrong on Lee Kuan Yew
- 3 Watch: Man takes selfie every mile of 2,600 mile hike, creates amazing timelapse video
- 4 #FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
- 5 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
Nigel Farage brands LGBT activists 'filth' and 'scum' and accuses them of scaring away his children after they invade his local pub
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Russia threatens Denmark with nuclear weapons if it tries to join Nato defence shield
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Revealed: Putin's army of pro-Kremlin bloggers
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...
Day In a Page
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station