Expertise or execution? The choice is yours

MONEY Q&A

You have written in the past about the advantages of using financial advisers who don't actually give advice but give a rebate of their commission. What are the advantages and where can I find these advisers?

CP, BERKSHIRE

What you are looking for are commonly referred to as discount brokers. They cannot be called "advisers" if they do not give advice, although some firms divide their business into a financial advice service and a discount broking side. Discount brokers offer what's called an execution- only service - a term also used to describe some stockbrokers' services. A key feature of this is that you have to know exactly what you want to buy by way of PEPs, unit trusts, pension plan, endowment policy or whatever.

A discount broker may provide information about different products. The divide between giving advice and giving information can be hazy. If they are advising, they have to find out all about your circumstances and are required to give you various bits of bumf about projected cash-in values and so on.

A discount broker has less bureaucracy to deal with but receives the same amount of commission. Hence, discount brokers can pass on some or all of that commission to an investor. With some types of investment, that rebate can be quite significant.

Perhaps you know you want to invest in XYZ SuperGrowth PEP. Maybe you have seen an ad in a newspaper with a Freefone number to call. Before ringing that number, bear in mind that buying through a discount broker might work out cheaper than buying direct from the management company. Managers are reluctant to give investors a discount on the usual 5 to 6 per cent initial charge on a PEP, for fear of upsetting the financial advisers on whom they rely for business.

Discount brokers vary in the products they sell (some offer life insurance as well as investments) and in precise terms of business. It may be worth ringing round to find the most cost-effective service. Some to try are: Chelsea Financial Services, 0171-351 6022; Elson Associates, 0500 691790; Financial Discounts Direct, 01420 549090; PEP Direct, 0800 413186; Unitas, 01724 849481.

Two other points. First, a growing band of companies, including Virgin Direct, only sell their products direct to customers from ads. Because they don't use an intermediary, the reduced costs should be reflected in the price you pay. Second, if you need the help of a conventional adviser, you should accept you will pay commission but ask whether any will be rebated to you.

Write to the personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a phone number; or fax 0171-293 2096; or e-mail i.berwick@independent.co.uk

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