But this is not necessarily so. When buying PEPs or unit trusts there is nothing a fund management group likes better than the investor who comes to it direct. It provides the opportunity to keep the commission it would have paid out.
Apart from tracker funds that involve no active management, unit trusts generally have an initial charge of 5 per cent for any new investment. Of this, 3 per cent is paid to financial advisers. Go direct and the fund manager simply keeps this.
But for the canny investor, there are ways to save money. This is by using execution-only services. These firms do exactly what the title implies - they just execute your deals. If you know what shares or funds you want to purchase, you will find some attractive savings.
Some names to watch out for include Hargreaves Lansdown, PepDirect, PepWise, Pep Superstore and Pep Shop. While they may send you a newsletter, they won't offer advice. What they do is save you money. This is because discount brokers share this commission with the client either in a rebate or as extra units in the fund.
Sometimes discount brokers negotiate special deals that can be attractive. For example, Hargreaves Lansdown is offering a 5 per cent discount on the Perpetual Triple Growth and the Perpetual Dual Income Peps, two packages from the largest PEP management group.
If you want to deal directly with the fund manager and don't mind it keeping the commission, companies such as M&G, Legal & General, Save & Prosper and Royal SunAlliance have set up separate direct telephone services, but you may find that they only offer a limited range of funds. Others just offer their tracker funds. Direct investing has become so popular that companies such as Virgin Direct and Direct Line only offer unit trusts and PEPs over the phone.
Often these lines are open seven days a week until 10pm. You call up the service, tell them which fund you want to invest in and how much, and give them your personal details. If you are buying units, the transaction will be carried out immediately and you will be sent a contract note.
After checking the details, all you need to do is sign the note and send it back with the cheque.
If you are investing in a PEP you will be sent an application form to complete before the transaction is carried out. For investors with a computer who are on the internet, Fidelity permits them to top up their PEPs and unit trusts on-line, using a sophisticated service called WebXpress.
The only real problem with using the phone for share dealing is that during busy periods you may have difficulty getting through to a broker.
Contacts: PepDirect, 0800 413186; The Pep Superstore, 0171 351 6022; The Pep Shop, 0115 982 5105; PEPwise, 0345 573277; Hargreaves Lansdown, 0117 988 9880; CaterDeal, 01708 742288; Charles Schwab, 0121 200 2242; NatWest Stockbrokers, 0171 895 5955; The Share Centre, 0800 800008; Virgin Direct, 01603 215717; M&G, 01245 390390; Royal & Sun Alliance, 0500 111333; Legal & General, 0171 528 6200; Fidelity, 01732 361144; WebXpress, 0800 413125.Reuse content