Survey: Invest direct - Welcome to the fast lane

Buy a financial product via phone or computer and you'll cut the charges and cut the jargon. The catch? You must know what you want

SELLING anything from insurance to pensions over the phone may be fashionable but we have been buying financial products this way for years. Wasn't doorstep collection by the men from the Pru or the Co-op just a form of direct selling?

Before 1985, hardly any financial services were available on the phone. Everything had to be done at face-to-face meetings. And these had to take place during normal office hours. This meant that you would have to take time off work to sort out your finances.

Then along came Direct Line. It sold motor insurance over the phone. The operators stripped away the jargon and asked simple questions in everyday English. Today, the company has well over 2 million motor policyholders.

Direct Line started a revolution in the way financial services are sold. By 1990, Midland Bank had begun the first telephone banking service through its First Direct subsidiary, a bank open 24 hours a day, seven days a week, with no branches.

Direct providers recognised that by working out of low-cost offices, preferably in a part of the country with cheap rent, and employing clerical staff to process customers rather than having highly paid advisory staff, they could slash costs. Indeed, the hallmark of direct providers is that they don't pretend to offer advice - and if they do, it is only about their own products.

We can now buy most financial services using the phone. And for those of us who have a home computer and a modem, we can use the internet to buy motor and household insurance, trawl through some of the best mortgage deals, look for the best PEPs, and buy and sell shares and unit trusts. Very soon, it may be possible to buy pensions on-line.

It is also cheap to buy direct. As there are no sales forces or large commission fees to pay, considerable savings are passed on to us, the customers.

Not all the direct providers offer 24 hours a day, 365 days a year operations, but they do open during times that suit us. If you want to know your bank balance at 7am or 7pm, no problem. If you want to buy a pension, renew your house insurance or buy a PEP, all you have to do is pick up the telephone and dial the company.

Much of the impetus for the growth of direct services has come from new entrants to the financial sector. Names such as Virgin, Marks & Spencer and now Tesco, previously known for their retailing strength, feature among the leading pension and PEP suppliers, and have begun to carve out a significant share of the market.

Traditional insurance companies and investment management groups had to respond. In the early days, they often set up a subsidiary with a different name because they did not want to annoy financial advisers. Now companies are happy to drop the disguise. Most of the majors - including General Accident, Legal & General, Royal & SunAlliance and Norwich Union - have their own direct-selling arms, undercutting the more conventional products sold by the parent company.

Others have been taking over direct-selling operations. Last year, for example, Liverpool Victoria acquired Landmark, a small direct insurer which specialised in private motor and household insurance.

The key to buying on the phone is to know in advance what you want. By ringing around and asking for the information to be sent to your address, you can compare products and services from the comfort of your armchair.