Free corkscrews don't have the pulling power

YOUR MONEY Personal Finance

BONUS schemes that seek to prove the claimed benefits of being with a mutual organisation - where customers are also the owners - are all the rage currently, as we report elsewhere on this page about building societies. This week, a friendly society, the Harrogate-based Homeowners, also jumped on the bandwagon, claiming to offer the first scheme from a friendly society to involve real mutual value for its customers, called members.

At the core of friendly societies' business is the tax-free but high- cost savings plans they offer to small savers. Homeowners now says it is negot- iating better deals - whether in price or cover - on behalf of its members for various insurances, specifically motor, building, contents, personal accident and medical. Homeowners says that unlike other such deals offered by friendly societies, it does not plan to make any money out of the arrangement

In my book, friendly societies have always been pretty low down the evolutionary scale in the mutual universe (which includes building societies, life insurers and the Co-op move- ment). One friendly society's current efforts to drum up interest in its tax-free savings plan by giving away free corkscrews doesn't exactly fill me with confidence.

This latest wheeze from Homeowners does nothing to change my opinion. Showing the benefit of being with a mutual should be about more than giving customers a discount if they buy something else as well. That's simply good business sense, customer retention and all that. It's not nearly as mutual as reducing the rip-off on policies and products held by existing members, which building societies are already doing.

AN INTERESTING little row has broken out about how good Direct Line's motor insurance deals are. The Advertising Standards Authority this week ruled against Direct Line's press advertisement "Every six seconds, somebody gets a better deal on their motor insurance". It said Direct Line had not demonstrated that everyone buying was getting a better deal than previously. So it should alter its advertising.

Earlier this year, the ASA ruled against Direct Line for its catchline "Best for price, best for service". Direct Line is going spare - this is the ASA's third ruling against it this year (the other being about small print). It is complaining to the chairman of the ASA and says the latest ruling is "contrary to basic common sense".

The insurer accepts that it cannot offer absolutely everyone the cheapest cover available. But it says price is still the key for most consumers and that the vast majority of people who switch to Direct Line do so on the basis of price. Cynics might think some people buy Direct Line on the strength of its brand - that annoying little red phone on wheels that goes "beep beep" - without considering if there are even better deals elsewhere. If the latest ruling from the ASA encourages people to shop around to a greater degree, then more power to its elbow.

TOO many supposedly independent financial advisers (IFAs) turn a blind eye to index-tracker unit trusts and PEPs despite their lower costs, predictable performance and in many cases good track records.

One reason is that they are not big commission payers. Virgin Direct's index-tracking Pep, for example, has made great play in its own sales pitch of not paying commission at all. So perhaps an IFA launching its own index-tracker PEP should come as little surprise.

The adviser, Bristol-based Hargeaves Lansdown makes the worthwhile point that with investment returns expected to be smaller in the lower-inflation 1990s, charges on many existing investment products are increasingly unsustainable. If the stock market is going up 15 to 20 per cent a year, as in much of the 1980s, investors do not have to worry so much about charge deductions of 5 per cent at outset and 1.5 per cent annually thereafter.

If, on the other hand, stockmarket returns struggle to achieve double figures in the 1990s, those charges are going to take a much bigger slice. Investors might question the value of being in the stock market at all. Lower-cost trackers could be better placed to maintain the all-important extra return over cash.

Hargreaves Lansdown is also offering free copies of its latest guide to shareholder perks - the product discounts available to investors holding shares in particular companies. Phone 0800 850611. The guide is worth having, but expect to get details of the new PEP as well.