Britain's largest banks, building societies and some large insurers are using their massive sales and advertising power to sell unit trusts and PEPs (personal equity plans) to a captive audience of account-holders and existing investors.
Yet the performance of many of their funds lags behind that of those managed by some specialist companies. The difference between top and bottom performing funds can run to thousands of pounds over several years - a bitter pill for the losers.
Worries over the potential for investors to make mistakes they might regret come as the PEP investment season hots up. About half of PEP sales traditionally take place in the three months before April 5.
Jason Holland is a manager at BESt PEP, a stockbroker specialising in personal equity plans. He said: "Investing in a PEP with a manager who may be a household name or with whom one has a bank account is definitely not a guarantee of better returns.
"Investors are much better off looking for a specialist fund manager offering one fund, or a range of funds with a good performance record.
"It may not always be advisable for a risk-averse person to invest in a PEP, especially if the only reason for doing so is tax-avoidance," he added. "In cases like this, it is always better to talk to an independent financial adviser who specialises in PEPs rather than simply buy something on the spur of the moment."
In recent years, the tax-free advantages of PEPs have led to a spectacular explosion in sales, with the total market in the 12 months to April likely to reach £6bn.
In the next year or two, banks and building societies are expected to increase their market share at the expense of smaller investment managers.
Although in some cases their PEPs and unit trusts deliver good returns, many advisers believe that on the whole they offer insipid performance.
Research by BESt PEP shows that in the six months from April last year, the top 10 PEP providers collectively sold more than 50 per cent of all equity plans. Only three of them were specialist unit trust managers. Perpetual and M&G, the top two, attracted £511m between them.
BESt PEP has tracked the relative performance of each PEP provider by averaging the growth of the UK funds they manage.
Over five years, Perpetual's average rise in value across its four UK income and growth funds placed it top among the best sellers. Not a single bank, building society or large insurer in the top 10 was able to match its overall performance. Yet these companies attracted more than £700m of investors' funds between them in the six-month period.
M&G's average growth was beaten over five years only by Co-operative Insurance Services and Pearl, the insurer.
Separate research by the Allenbridge Group, another well respected PEP specialist, uses a sophisticated system to calculate both the risk associated with a fund and its consistency over a given period.
Sharon Kenley, a PEP analyst at the Allenbridge Group, stressed that most big providers should have at least one decently performing fund that is worth looking at.
"One of the banks may well have a good performing fund. What is shocking is that there are household names that have funds that are not performing well at all," Ms Kenley said. "Yet people may not be aware that there is so much marketing and hype to many funds. I don't know what happens if you go into a bank and say that you want to buy a PEP.
"I can only assume that they put you in touch with a salesperson who sells you one of his own company's products. People should take independent financial advice and look at all the available figures before buying a PEP. It is a shame that so many people don't."
Mark Goodman is investment marketing director at Prudential, which ranks eighth in the league of PEP providers. The Pru has two PEPS, managed unit trust and global growth. Over one year, the managed unit trust PEP was ranked12th among 57 funds in its sector, while the global growth PEP was 60th out of 152 funds.
Mr Goodman said: "It can sometimes be a mistake to compare funds within a sector because although they may come under one heading they do not always aim to achieve the same thing.
"What we try to do with our funds is to meet the needs of clients we come into contact with through our home service division of sales staff.
"They are not necessarily looking for the most aggressively managed funds.
"What they are looking for is solid performance, with Prudential taking the decisions."
Jain Castiau, marketing director at Barclays Unicorn, said: "BZW are our investment managers, which probably sets us apart from most other bancassurers. We have been in this business for over 35 years."
She denied that banks simply use their superior marketing strength to plug unsuitable products. "We are trying to build a longer-term relationship with our customers. They come to us because they trust us," Ms Castiau said.
"That is why we don't simply sell someone a PEP or unit trust.
"If a customer makes an enquiry, we do a review of their affairs, and depending on their attitudes to risk and their needs we would come forward with a proposal.
"We are like Marks and Spencer," Ms Castiau added. "People want value from us and that is what we aim to provide."
Top 10 performers
PEP sales in the first six months of 1994-95 tax year
Source: BESt PEPReuse content