Cut out the middle man

You could soon be making decisions about investments at the click of a mouse, reports Stephen Pritchard

THERE is something slightly distasteful about discussing financial matters face to face with a stranger, which the success of phone-based firms such as Virgin Direct seems to confirm. Even with advisers being required to disclose the commission they earn on financial products and the clauses on "best advice" in the Financial Services Act, many investors still believe the gap between "financial adviser" and "salesman" is not wide enough to fit a razor blade.

Some financial advice is very good, but "advisers" are often either "tied", selling products from just one company, or influenced by commission. Putting more information into the hands of investors is one way to ensure advice measures up. For example, if companies selling unit trusts put performance statistics on their websites, clients can compare them with other companies' figures.

For the more experienced investor, the internet can cut out the inconvenience of going to an adviser, especially for those who hold a fund or set of funds with a particular investment house. Adding to or shifting money between investments should be easy - make the decision and carry out the transaction. Some houses already offer this and more are bringing it on line.

One very comprehensive site is run by Fidelity Investments. As well as the usual information about the company and its products, its pages contain details on fund prices. Fidelity's WebXpress allows customers to view details of their funds, check their values and deal on line. There are clever graphics, too: for example, the system displays investment holdings by industry sector as a pie chart on screen.

Last month, the company added a "top-up" facility on line for its Peps and unit trusts. Anyone who has money with Fidelity can add to his or her investments using the website and a Delta or Switch card. The only limit is the money available in the current account and, for Peps, the ceiling on investments.

Richard Wastcoat, Fidelity's executive director, says the logical conclusion is to let new customers take out new investments over the internet. The main hurdle is an Inland Revenue demand for a written signature for a new Pep.

Mr Wastcoat believes pressure is growing on financial services companies, on both sides of the Atlantic, to let investors manage their money when and where they please. Clients, he says, want more than just "static data", such as unit prices.

Not everyone wants to be so involved in their finances. Mr Wastcoat believes it is younger investors who take a hands-on approach. For investors who prefer a conventional adviser, many have set up on the internet, as individuals or via umbrella groups such as DBS.

But advisers maintain that the internet is a shop window, rather than a counter. Brian Spence, managing director of Ethical Financial, points out that some 1,500 people visit its website weekly, but it is hard to know how many mouse clicks translate into business.

He believes clients still prefer to see an adviser face to face. "The nature of our business is that it is personal," he says. "People who come to us want an IFA to review their finances." Spence sees the internet more as a means of communication between client and adviser than a sales tool.

But not everyone wants a long-term relationship with an adviser, as the success of direct financial products reveals. Instead, there could be a separate market for one-off help with finding a good deal, especially in busy areas such as life assurance or mortgages. Something similar already exists in the US, where tax advisers offer opinions via e-mail for a small fee.

It is not hard to imagine paying an insurance or pension specialist pounds 15 or 20 to trawl through the direct market and unearth the five best deals. It cuts out the commission - and possible bias - of traditional brokers, saves a lot of time, yet leaves the final choice of policy with the client. It's not here yet but it could come sooner than some might like.

q Fidelity (UK site): www. fidelity.co.uk; Fidelity (international site): www. fid-intl.com.

Ethical Financial: www.ethical financial.co.uk.

DBS: www.dbsfinman.com.

Lists of financial advisers are available via MoneyWorld: www.moneyworld.co.uk; and MoneyWeb: www.moneyweb. co.uk.