Income And Growth Survey: Advice squad

MAKING AN investment is not just about what fund to pick. It also involves deciding where to buy it from. What happens if, in addition to making a purchase, one would like advice on the right fund?

One point worth noting about discount brokers (discussed in the above article), is that while they do not give advice but simply act on your instruction, they are allowed to give "guidance".

This often means publishing comprehensive tables and charts which lead an investor towards making an appropriate choice out of a narrowed-down range of funds.

Of course, the danger is that the funds on offer may be the ones where the broker has extracted some special deal - for himself, that is. If you feel this may be the case, one answer may be to place yourself on the mailing list of several brokers and simply compare their tips to see which ones are repeated across all brokers and why.

Alternatively, there are other potential sources of information. Probably the best in almost all cases are independent financial advisers. Their role and effectiveness is generally well understood. Most are relatively able and won't be subject to commission bias or other factors that might influence them one way or another.

Others, even if honest, might suffer from lack of research facilities or may be swayed by the latest fund management representative who walked in through their office door.

Even so, they are preferable to most company salespeople or tied agents. These are people who are employed by one company to sell its products. This is fine if those products are OK. But it does not help if the range of funds on offer from the company employing them is very narrow or their performance is generally shocking. Generally, unless you know something about that product, it is generally sensible to steer clear of such "advisers".

Many fund providers sell directly to customers. That is, they sell their PEPs ( from 6 April, their ISAs) through adverts or over the phone. The overwhelming majority of direct sellers' representatives are highly trained and won't try to ram a product down your throat, especially if it is not suitable for you.

And in some cases, direct providers will offer a discount if you buy through them. But in many other cases this is not so. Charges will be the same as if you had gone to a commission-driven adviser. In which case, you may find yourself asking why you bothered going direct in the first place, especially if the fund was not exactly what you needed.

The moral of the story is: if you know what you want and feel safe in buying direct, go to a discount broker. If not, talk to an independent adviser.