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Share accounts - Building society terminology for a simple savings
account useful for small lump sums or regular saving. With a
share account you get membership of the society.
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Deposit accounts - Similar to share accounts but you do not
get membership of the society. Check the interest rate paid
against the share accounts.
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Notice accounts - Come in a variety of 7-day, 90-day minimum
notice periods for withdrawal. You should earn a higher rate
of interest for locking your money up for longer.
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Term accounts - If you agree to deposit your money for up to
five years you get an even higher rate of interest.
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Save
as you earn - Building societies will accept regular monthly
income from you. The scheme was introduced by Roy Jenkins in
1969.
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Cheque book account - A building society will let you have a
cheque book and will normally pay a little bit of interest as
well.
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Postal
accounts - Because of reduced costs in their running these should
pay a higher rate of interest.
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Deposit
account - At a bank this is normally a seven-day notice account.
Interest is usually paid every six months.
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High interest cheque account - Best of both worlds, you get
a decent rate of interest and a cheque book. The drawback is
that the minimum investment is high, usually at least £1,000.
-
Term account - A lump sum invested over a fixed term at a fixed
rate.
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Currency account - You pay sterling in, but your money is converted
to a currency of your choice.
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Football affinity accounts - 'Affinity accounts' offer football
fans the chance to boost clubs' coffers but not their own.
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Financial advisers: how they work
Knowing where to go for financial advice is half the battle
when trying to sort out your financial affairs. Over the years
the appearance of the financial services industry has grown
more confusing with banks, building societies, insurance companies,
fund managers, stockbrokers and independent financial advisers
(IFAs) all vying with each other to serve the public and take
your hard-earned cash.
Fortunately, they can all be divided into two neat groups. Anybody
offering financial advice to the public must either be "tied"
to their employer - in which case they can advise only on that
company's products, or they must be "independent", in which
case they have to consider all available products.
The point of this sharp distinction - known as "polarisation"
- is to ensure that investors understand the motives and status
of the person they are dealing with.
Although both tied agents and IFAs are required by law to give
customers "best advice", the former have far less room for manoeuvre.
Tied agents are effectively salesmen operating on behalf of
one company. They are employed by insurance companies and banks
to sell their investment, pension and insurance policies to
the public, either by visiting people in their homes or by arranging
for them to come into their branch office to discuss their financial
affairs.
Like any salesmen tied agents are mostly paid in commission.
This means the more they sell the more they earn. Companies
that employ salesforces frequently set targets and incentives
to push particular products.
IFAs, however, are required to compare all policies and to select
the best. Most big IFA firms do this by using modern software
to construct "best buy" panels that regularly change their selection
of companies.
You should remember, however, that financial advice costs and
most IFAs receive commission payments from insurance and pension
companies in much the same way as tied agents do. Many investors
do not mind this as it means they do not have to dip into their
pockets to get the advice.
However, insurance and pension companies frequently vary the
fees they pay to IFAs depending on how much of or what kind
of product they have sold. This has led to accusations that
IFAs are just as biased as tied agents. Nevertheless, the I
in IFA does mean something. Although investors should be on
their guard, as a general rule they will get better service
from an IFA than from a company salesman.
Checking which camp your adviser belongs to is important but
can be tricky. Many companies employ both IFAs and salesmen.
You can make sure by asking at the outset of a consultation
whether he or she is tied or independent. Check their business
card if you are unsure.
To ensure complete objectivity there are a growing number of
IFAs who do not take commission but who charge an hourly fee.
For details ring the Money Management helpline on 0117-976 9444.
Help - For details of other IFAs contact IFA Promotion on 0117-971
1177.
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