Q & A

I am looking for investment advice and would like to know how I can be sure that the advice I receive is truly independent. I am particularly concerned given the number of stories in recent years about rogue advisers, never mind the recent row over one of the banks.

Ms A.R., Dublin

Your concerns reflect those of a growing number of small investors in recent years. It is not that the industry has a particular problem, just that it has been subject to a number of high-profile cases where the system was either not in place or broke down.

There is also the additional fear people have that advisers might try to sell a particular product over others.

There are two sorts of investment intermediaries - independent and tied. The latter, as the name implies, are tied to a particular financial institution and will sell only its products. Regardless of their status, anyone authorised to sell investment products must appear on a register which is held by the Central Bank. The register, which is available to the public, will state, among other information, whether the person concerned is tied to a particular financial institution and where they are based. It can be viewed by calling to the Central bank, which is on Dame Street in Dublin.

It is important to remember that the best investment product for you may indeed be one available from a tied agent, but it is certainly worth getting an independent view of the market and its ability to meet your particular needs before opting for any course of action.

While independent advisers are supposed to be precisely that and should be able to offer products across the range of products, it is sometimes the case that "independent" advisers will favour products that offer them a better commission. In the past, in Britain, this has been seen as a factor behind the fashion for endowment mortgages and the move from occupational to personal pensions.

The only way to be certain that the advice you receive is "truly independent" is to opt for a fee-based adviser, who will proffer advice without the possibility of reward through commission. Such advisers are somewhat thin on the ground and many small investors balk at paying upfront for financial advice. If what you are seeking is insurance advice, the Irish Brokers' Association is the representative and regulatory body for the sector, by the authority of the Department of Enterprise, Trade and Employment under the Insurance Act 1989. Its rules dictate that the 600-plus brokers it represents around the Statebe independent and bonded. Its offices are at 87 Merrion Square, Dublin 2 (Tel: 01 661 3067).

In recent articles, one of your colleagues has referred to the requirement by law for demutualising building societies to issue shares only to people whose names appear first on a qualifying account for two years. Subsequently, I read about Irish Nationwide's £10,000 minimum qualifying balance in an investment share account. Does the two-year threshold still apply? Is it at liberty to decide who would qualify or are they governed by the legislation and what is that legislation?

Mr D.M., email

There are two separate issues raised by this letter. The first is the legislation governing proposed moves by any mutual society to public limited company status; the second is the right of an institution to set its own additional qualifying parameters.

The law on this issue is essentially contained in the Building Societies Act, 1989 and the Central Bank Act, 1989. For the purposes of this question, the key provision is that account holders must be the first named on the account for two years prior to the vote on flotation in order to avail of free shares, although the rules on who may vote on that flotation proposal are slightly more relaxed. There has been a slight change following the row during the Irish Permanent flotation over second-named spouses on accounts where the first-named spouse has died prior to the flotation. Now, such second-names spouses are entitled to the shares in those cases, as long as all other qualifying criteria are met.

Irish Nationwide is entitled, as it has done, to lay down additional criteria for membership of the society. This is primarily to dissuade carpetbaggers - people who open accounts with mutual societies in the expectation of reaping disproportionate rewards if and when they go public. Its so doing does not annul the parameters laid down in the legislation for the disbursement of free shares in the event of a flotation. As such, the society is entitled to decide who qualifies for free shares, should it decide to demutualise, but only by imposing additional criteria which are more demanding than but not in conflict with those laid down in the Acts.

Having said all that, there is no indication that Irish Nationwide intends going public at the present time.

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