Your Money: Stay canny for the BT bonus

THIS is the last weekend before registration for BT3 closes. Investors are being lured towards signing those cheques in much the same way that it is always easier to buy that shirt in Marks & Spencer knowing that you can return it.

You cannot return BT3 shares if you find they do not fit your portfolio (say, if the premium isn't large enough to make a a profit, or the long-term prospects are not good enough). But you can register with every share shop in sight and still decide not to make an application in the end.

But if you fail to register with a share shop before Friday night, then your chances of getting a reasonable allocation will be dented. Even registering via the share information office will get you a better deal than those who fill in newspaper forms.

Of course, if there is no scaling back then registering will make no difference.

While the mood over BT3 has been more sombre than previous issues, in the end it will probably 'get away'.

The minimum application is 120 shares with a first payment of pounds 1.50 per share - pounds 180. The institutions are expected to pay about pounds 1.60 - a 10p per share windfall, other things being equal. On the minimum investment that should cover dealing costs if you want a quick exit. But the canny will stay to September to pick up the juicy dividend.

FIXED-RATE mortgages are more fashionable now than ever. Yet a High Court case decided last week began several years ago, when interest rates were high and the scene was very different.

Now most fixed rates are a shade above the current rate, reflecting the view that interest rates are likely to rise. But a few years ago, when interest rates were high, the markets expected rates to come down, so fixed-rate deals undercut the variable rates.

Some lenders thought that it was reasonable to assume that the variable rates would fall and quoted APRs based on the fixed rate.

The court ruled against this line. Ironically the two lenders involved in the case - Abbey National and National Westminster Bank - have both changed to using the fixed rate followed by the current variable rate anyway. If interest rates rise, as the money market rates are foretelling, then these APRs will give a falsely rosy picture.

SIR BRYAN Carsberg, the Director-General of Fair Trading, said again last week that he is reconsidering the way financial salesmen are divided into those who sell the wares of only one company, and independents, who roam the field.

Independent financial advisers are often held out to be the goodies merely because they can use their judgement to pick between providers of pensions, unit trusts and insurance bonds. But that is not enough to ensure decent advice.

They are campaigning against the OFT's paper lodged with the Treasury, which suggests that they should disclose their commission. It's all rather unedifying.

The only genuinely independent adviser sells advice. Like an accountant or solicitor, you pay for time. There are not too many independent advisers who prefer non- commission-paying National Savings certificates to ludicrously complicated insurance-based deals which pay them a packet.

QUESTION: When is income not income? Answer: When it's a regular payment made out of your capital.

A whole raft of new-style bonds offer set 'income' that could be at the expense of the return of your investment if the FT-SE index does not perform well enough.

Scottish Widows, S&P and the Life Association of Scotland all have such products. For instance, the new Quarterly Income Bond from LAS pays out 10.1 per cent per annum. But if you invest pounds 10,000 you get the pounds 10,000 back after five years only if the stock market rises by 8.75 per cent or more. A higher rise in the index will not bring a bigger repayment, but a smaller rise will mean a cut. With a 4 per cent rise, pounds 7,155 is returned - a total payback of pounds 12,025 including the 'income'.

There is nothing intrinsically wrong with all this. It is comparisons with building society returns, and the false sense of security that an unrealistically high income can be obtained without risking capital, that are worrying.

Investors need to understand they can get impossibly high incomes only by accepting some risk. What is needed is another word to describe a regular payment that is different from the sort of 'income' that comes from interest or dividends, and is divorced from your capital.