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Discount brokers can save you money - if you know your stuff.
But if you know which investment you want to put your cash into, there's no need to pay for what can be expensive advisers. Instead, you can simply use a discount broker.
These are execution-only firms which will buy products for you saving you the cost of paying for someone's expertise. Even better, they can save you more money by rebating any commission paid out by the product providers.
The commission could be around 3 per cent, which on the maximum pounds 6,000 you can invest in a PEP amounts to pounds 180.
"There are a lot of people who don't realise this service exists and could benefit substantially from using a discount broker," claims Alan Penny, chairman of brokers Financial Discounts Direct. "If you know which product you want and from whom you wish to buy it, you can get the commission rebated back into your pocket or investment."
But if you end up in the wrong product you'll only have yourself to blame - and it could well be a costly mistake. "If you look at the mass of PEPs that have recently come on to the market, a consumer's going to find it very difficult to make the right choice," warns Simon Holt, managing director of IFAs Skipton Financial Services.
"This is especially true at the moment when there's just a limited time scale to buy a PEP. It's true investors could save 2-3 per cent up front by going to a discount broker, but choosing the wrong PEP could cost them dear," says Mr Holt.
"You've got to be absolutely certain in your own mind that you're able to do all the research that a qualified IFA can do, if you're going to use a discount broker."
There are a number of discount firms around and charges vary which means it's worthwhile shopping around. The amount of commission rebated also varies, so it's worth checking what share a discount broker will offer you.
Companies such as Hargreaves Lansdown and PEPwise charge no fee for investing your money in a PEP and fully refund any commission they receive. They actually make their money from the renewal commission they receive from the PEP provider in later years. Other discount brokers, such as The Pep Superstore, which is part of Chelsea Financial Services, splits the commission with customers while others, such as PEPDirect, refund all commission to the customer but charge a flat fee.
Another reason to consider discount brokers is that they may be able to negotiate unique deals for customers. Alan Penny says: "We can negotiate special deals with product providers and reduce the price still further."
Some IFA firms will offer you a choice of a cheaper execution-only service, or the more expensive advisory service. But, again, they warn of the dangers of choosing the cheaper route. "We offer discounts to those who know exactly what they're talking about," says Andy Harris, director of Maddison Monetary Management.
"If you've got the time to research the market then taking the discount is appropriate. But even confident investors should be wary. The market changes and new products appear and it's likely that only through a qualified adviser will people be able to ensure that they have the best products for their own needs. The fact is that most people aren't equipped to make the decisions for themselves," says Harris.
Anyone making their own investment decisions should ensure they read the small print of any product and understand the risks involved."
Financial Discounts Direct 0500 498 477 (the company offers a free `Guide to Buying Financial Products'); Hargreaves Lansdown 0117 988 9880; Pepwise 0345 573277; The Pep Superstore 0171 3516022; PEPDirect 0800 413186; Maddison Monetary Management 0800 074 2233
Alternatively, try the ISA Shop, which has dozens of PEPs to choose between, from its own comprehensive (and free) 64-page guide. Call 01777 839205
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