Your Money: Time to trust in mortgages

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FLEMINGS has 7,000 people making regular monthly payments into the investment trusts in its stable. So it is not surprising that it sees the potential for expanding the regular savings market into the mortgage field.

Saving via an investment trust - especially if it qualifies for tax privileges under the personal equity plan rules - makes more sense than using an inflexible endowment policy to repay an interest- only loan.

But Flemings has to wrestle with the problem of how the investment trust-backed plan is ever going to be sold.

It cannot rely on its existing band of devotees to want to take out, or top up, mortgages. If it pays handsome commissions to financial advisers to persuade them of its merits, the plan will prove little better than endowment policies that are crippled by high initial charges.

There are not enough fee- charging advisers around yet, which means Flemings cannot rely on an objective view coming across of the market.

When Foreign & Colonial, an investment trust manager, tried to crack this nut nearly four years ago, it soon discovered that it was paddling against a fast-flowing current.

But for anyone determined to find their own way around the mortgage muddle, repaying an interest-only loan through savings schemes such as an investment or unit trust looks attractive.

UNTIL now, PIA has stood for a way to fly to Pakistan. But those with an interest in investment will soon know it as the new regulator of private investors - the Personal Investment Authority.

And it looks like dirty tricks of airline proportions might be associated with its formation. Last week the grand-daddy of the regulators, the Securities and Investments Board, delivered a humdinger of a letter that has definitely scuppered the original timetable for the PIA - to be up and running by 1 July. In fact, it could jeopardise the whole plan.

The letter warned the PIA chairman, Sir Gordon Downey, that standards would have to shift up a gear or two. This is all very well. But it then delved into specifics such as the need for a slim- line board, with most of the members concerned with the public interest; high fees to pay for adequate back-up; and the need for all members to have pounds 10,000 behind them.

This would not be so bad were it not for the less-than- charming sign-off by Andrew Large, the SIB chairman, who more or less said that if the PIA could not deliver, then it would look elsewhere.

There were the predictable squeals that it was all impossible, but behind the scenes there was frantic reading of the runes. Was this an attempt by the SIB to drown the baby at birth? Or was it just flexing its muscles, faced with a set-up where it might look superfluous? As usual, the interests of investors, which is what it is supposed to be all about, are being overlooked. There will be a long, boring round of tough negotiations with positions being struck.

Perhaps the Treasury should rein in the warring factions. The notion of self- regulation will not do if the public is to be adequately protected; it should not be allowed to drag on as the central plank of regulation. It may be that an equilibrium can be found to suit all interests, particularly the public; then perhaps the current players can be allowed on a very long leash. This would be better than a government- operated regulator.

But the way things are going, it is by no means a foregone conclusion that we will not end up with a US-style government agency.

THE GRANDLY named Chartered Institute of Loss Adjusters, which represents the people who come in on behalf of the insurance company when you make a claim, has conducted a survey showing that 95 per cent of loss adjusters believe at least a quarter of all claims are exaggerated. The vast majority felt that claims were inflated by at least 25 per cent.

This means that honest claimants are always going to be in danger of meeting with the assumption that their claim is dishonest.

If the loss adjusters are sent in often enough to examine claims, and if they get rough enough, then honest people will begin to think like old-style trade union negotiators. They will inflate their claims in the certain knowledge that they are going to be beaten down.

This vicious circle will serve no one well, least of all the insurance companies, which will find that more and more customers decide that insurance is not worth the bother.