Independence day for First Direct

By JO THORNHILL
Updated: 19:00 EST, 16 January 2001

Internet bank First Direct has launched its own independent financial advice service offering fee-free investment, pension and life assurance advice for its customers.

The service, called First Direct capital will also offer online sharedealing in the coming weeks and is offering an initial charge of 2% on a selection of investment funds.

First Direct customers can sign up to capital for free and access the service by phone or online. However, while the bank's 52 salaried IFAs will give advice on any product available in the market, the online service currently will guide them through only 23 investment and six protection products.

First Direct's move into financial advice is an obvious step for a bank that has built up a customer base of around one million in the UK. Typical customers, according to the bank, are well-paid working people with little time on their hands.

This step by First Direct will no doubt be followed by the other major high street banks during the year. But it raises questions for customers. Just how independent can a bank's IFAs be?

Alan Hughes is the chief executive at First Direct. He hopes that customers will be reassured that the IFAs will not be paid commissions for the products they sell.

He says: 'Not only are the IFAs paid a good salary but they will also be frequently monitored for performance. And this will be on various criteria - not just the volume of sales. We'll be looking to get feedback from customers and we will be scrutinising the quality of advice given.

'Clearly it's not altruism, but we believe the value from the capital service comes from the relationships we build with customers and if they're happy with us we know they'll come back.'

First Direct says it is committed to offering the highest quality, competitive products and that the range offered online will be monitored daily and reviewed monthly.

Jason Hollands an IFA at Best Investments says First Direct and others might be making the right moves, but public scepticism could cause problems.

'The very nature of the big banks' branding means people naturally assume they will sell tied products or want to push them above others,' says Hollands. 'But they clearly have access to a full database of funds and products from all providers so there is no reason their advice won't be independent. Whether their IFAs will be any good or not is a different issue.'

Kim North, an adviser with Pretty Technical says: 'Is it truly independent? No, but it is good for the customer. For those wanting simple, straightforward advice and choice it's probably the best method. For IFAs it means we have to offer something more and go one step beyond, in other words, more specific and technical advice.'

First Direct's Alan Hughes concludes: 'People ultimately want to know who's side you're on - is it the supplier or the retailer? Our IFAs are very much the customer's agents and will strive to offer the best possible advice to individuals.'