Would you buy financial services from this man?

Or from a company better known for its underwear than its underwriting? By Alison Eadie

Pensions with your chicken pilaf. Tax- free personal equity plans with your airline tickets. Cars with your credit card. An unlikely mix perhaps, but the entry of companies like Marks & Spencer, Virgin and General Motors into financial services has proved a huge marketing success.

And the onslaught of the household names is set to continue. At the end of this month Virgin will take its message to the glossy pages of non- financial magazines. So far it has sold its personal equity planpredominantly to 40- to 50-year-old, high-income, professional males. Not Virgin's natural constituency. Now it aims to attract the non-financially aware, younger customer with at least pounds 50 a month to save.

M&S entered the unit trust market in 1988. It now manages close to pounds 300m of investors' money in two trusts and intends to capitalise on its database of 3.4 millon M&S chargecard and budgetcard holders. The GM Card from Vauxhall, launched last year and giving discounts on Vauxhall cars according to money spent on the card, is the fastest-growing credit card in the UK.

The power of a well-known brand is considerable and can persuade customers to buy financial products despite the company's lack of experience in the field.

To some extent the newcomers are benefiting from public disenchantment with traditional providers. The furore over mis-selling of pensions, endowment mortgages and other commission-loaded products has reduced consumer confidence in the financial services industry.

But are the household names providing anything different or better? They say they are. Tony Wood, marketing director of Virgin Direct Personal Financial Service, sees Virgin's target area dominated by large corporations that have lost touch with the needs of consumers. The principle applies equally to airlines, soft drinks and fund management.

Virgin rides to the rescue by giving better value for money. In the case of the Virgin PEPs the emphasis is on low charges - no initial charge, no sales commission, no shortfall between the buying and selling prices and a low annual management charge of 1 per cent.

The underlying product also cocks a snook at the fund management industry. It is a tracker fund that follows the performance of all 900 companies in the FT All-Share index. Virgin claims that the index has consistently beaten actively managed funds over many years. "It is a myth that highly paid fund managers add value," Mr Wood says.

Robert Colvill, managing director of Marks & Spencer Financial Services, says the hallmarks of its new life, investment and pension plans are simplicity, clarity and good value. He believes that the life assurance business has become complex through relying on independent financial advisers who serve well-off individuals.

But while the financial services industry can do little to withstand the power of the household name it does defend its record.

Lewis McNaught, managing director of Gartmore Fund Managers, says that Gartmore's tracker fund has done better than that of Norwich Union, the company chosen to manage Virgin's PEP. He also points out that PEP charges on Gartmore's index fund are comparable to Virgin's.

M&S's entry into the life and pensions market has caused uproar among the independent financial advisers who make a living out of advising the public.

M&S says it is only interested in selling pensions to those presently without one. It is not accepting transfers and is not giving advice, although in years ahead it may.

M&S has an eight-year track record in unit trusts. Mr Colvill points out that with a relatively unsophisticated clientele, M&S is not aiming "to shoot out the lights. We want a consistently above-average result which could be considerably above average in the long term."

However, Andrew Warwick-Thompson, who is head of partnership pensions at the actuary Bacon & Woodrow, warns: "If you buy any financial product off the shelf without taking advice, you are taking a risk."

But he says that M&S's charging structure looks reasonable, being neither the cheapest nor the most expensive, and the absence of commission means its plan compares favourably with single-premium policies.

However powerful the brand and whatever the quality associations earned on other products, it will not mask poor performance on financial products. If the newcomers can deliver above-average performance, success would seem assured.