Best to go for broker

By TONY HAZELL FOR THE DAILY MAIL
Updated: 19:00 EST, 24 February 2000

Thousands of investors will each pour hundreds of pounds down the drain over the coming weeks as they choose which stocks and shares Isa (individual savings account) to put their money in. Their mistake will be to buy their Isa directly from a fund manager or bank rather than going via a discount broker.

Most fund managers will deduct anything from 3% to 5.5% of your initial investment in charges if you go directly to them. So, by doing this you could lose up to £385 on a £7,000 maxi Isa investment or £165 on a £3,000 mini Isa.

But a good discount broker will refund some or all the commission they are paid - or reinvest it for you. You won't necessarily avoid paying all up-front charges but you should reduce them to a maximum of 1%.

Also, you must know which fund you want to invest in as most discount brokers don't offer advice. However, they are likely to have a list of recommended funds in each sector.

Don Clark of TQ Direct Choice, says: 'One of the sad things about our business is that some investors tend to jump into which ever fund is top of the tables. 'Technology is a case in point at the moment. There are structural changes which make technology attractive, but there are a lot of stocks that are clearly over-valued.'

It is certainly worth taking the preliminary step of calling around a selection of brokers. You could benefit by comparing the different deals they will be offering.

Bear in mind, too, that funds have different initial charges. What you actually pay, not the level of discount, is important.

Some funds, including most trackers, have no initial charge. But even on these you could still stand to benefit from using a discount broker.

Hargreaves Lansdown offers a 1% discount on Norwich Union's Performance Isa which includes its UK Growth and European Equity funds. These funds have no initial charge, so what effectively you're getting is a year's free management.

With several brokers offering very competitive deals, the name of the game has recently become service. Best Investment is alone in offering advice to people who do not want to pay fees, but others offer a range of after-sales services. Hargreaves Lansdown publishes reviews of the most popular fund managers.

TQ Direct Choice provides its customers with an internet site called TQ Premier Club on which they can receive annual performance charts and information.

Allen Direct also provides customers with regular performance charts to show how funds are performing against other funds in their sector. Other companies worth a try include Garrison in Sheffield along with Chelsea Financial Services and Financial Discounts Direct.