Personal Finance: The PIA's crackdown on broker fund fees is beginning to look weak to say the least

THE GENERALLY unreported problem of broker funds hit the headlines this week, as we report on our front page. Many tens of thousands of savers have upwards of pounds 1bn in these funds. In many cases the bonds' performances are abysmal. Yet the advisers and the fund managers administering the individual parcels of money all walk off with large management fees.

Now we hear talk of the Personal Investment Authority (the PIA), the financial regulator, cracking down on these funds.

The problem with such talk is that we've heard it all before. Back in 1997, the PIA released a report showing that broker funds had, on average, underperformed against their indexes in the previous six years.

"A general observation can be made that on average the underperformance against the index is approximately equal to additional management fees withdrawn from the funds, but that a number of funds have at least matched their chosen index," the PIA noted drily, even then.

The PIA report in 1997 found that broker funds provided 25 per cent or more of the annual income for almost 20 per cent of IFAs that offered them.

Two years later, faced with evidence that this underperformance continues and that pounds 1bn still remains - in most cases, wrongly - invested in broker funds, the PIA's self-styled "crackdown" begins to look weak, to say the least.

It might have been easier to rule that unless a broker fund manager can either show out-performance against a relevant index, or obtains a mandate from all clients specifying that their money should remain in one, all funds should be closed down within six months. But that's far too easy.

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IF YOU are one of the many tens of thousands who have called Standard Life Bank to inquire about one of its mortgages, you might be interested to know that the company is currently acquiring borrowers at the rate of knots. The advantage of these "flexible" mortgages is that because most are set at a variable rate, without compulsory insurances and so on, it is simple to work out exactly how much they cost relative to the competition.

Strange then, that with the letters confirming that it is prepared to grant you a mortgage, Standard Life Bank is sending out comparison tables. These show it is 0.25 per cent cheaper than Legal & General Bank, which offers a near-identical loan. The comparison dates back to 6 January, which is the day before L&G also cut its rate to match Standard Life.

Obviously there was no attempt by Standard Life to mislead borrowers, and this was pure coincidence. Of course it was.

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THE LAST time I was about to incur bank charges (through a oversight on my part), I phoned up my assistant bank manager and successfully pleaded for them to be waived.

Then I succumbed to the notion of convenience and switched to telephone banking instead. This week I received a letter from my new bank telling me that, because I was over my agreed overdraft limit for about three days last month, I would have to pay a one-off charge of pounds 35.

A very nice woman at the othe other end of the phone was completely inflexible on the matter. Which is fair enough, I suppose. Rules are rules - although it makes me yearn for my old assistant bank manager.