Broker vs online comparison sites??

Stu78

I recently saw a broker about a mortgage, and whilst I was there he tried to sell me some insurance policies. Buildings/Contents, Unemployment and mortgage life assurance. I listened and asked for printouts, just to see how they stacked up.

He was insistant that I'd find cheaper online, but they would not be anywhere near as 'good' as the policies he offered.

So I went online and found the exact* same life assurance policy through an online broker for about 70% of the price quoted by the first broker. That adds up to quite a lot over the term of the policy.

I feel a little bad for getting the free advice from the broker and then finding the same policy cheaper elsewhere, but you have to think of yourself first, no?

He also said that buildings/contents insurances on the online comparison sites strip out all the extras to present a really low price, but If I don't want all the extras, what is the problem?

Is he simply trying to scare me into buying through him by saying 'You can find cheaper, but they might not be any good'. I only have his word that the policy he is selling is any good.

*same insurance company, same product and same amount of cover (not read the small print on either policy yet!)

I am happy with the service he is providing on the mortgage, but I am a bit sceptical about the added extras he is trying to flog.

Any comments welcome from brokers or customers!

Cheers

Stu.

dunstonh

He was insistant that I'd find cheaper online, but they would not be anywhere near as 'good' as the policies he offered.

There is an element of truth in that. A number of the providers Martin highlights in his articles are budget versions of the plans and have restrictions or clauses which are not present in better quality plans.

So I went online and found the exact* same life assurance policy through an online broker for about 70% of the price quoted by the first broker. That adds up to quite a lot over the term of the policy.

I very much doubt that is the case. You are probably not comparing like for like with a difference that large. Probably you have chosen reviewable premiums and left off options which were present on the advised plan. Most common error by DIY policies is for people to mix up CI and TI cover to think they are the same thing (TI is usually free. CI is quite expensive and can often double the premium).

He also said that buildings/contents insurances on the online comparison sites strip out all the extras to present a really low price, but If I don't want all the extras, what is the problem?

Again, quite often true. However, if you dont want the extras, see what the broker can quote you on standard terms.

Unless you are going fee based, then you will be able to get it a little cheaper online if you are seeing an IFA (or independent mortgage broker in all areas) and a lot cheaper if you are seeing a tied agent. However, a 70% difference suggests you are not comparing like for like.

Also, if you want cheap rubbish then pay for that. If you want better quality, it usually costs more but is worth it when you come to claim (MPPI being the key area there when you consider the exclusions Ant insurance (and similar underlying insurer versions) have).

rudekid48

At the risk of upsetting the IFA's that use the forum, you will usually not get the best deals for Buildings and Contents Insurance from an IFA, not because they will offer you an inferior policy, simply because they tend not to have access to as wide a range of products as the larger "Brokers". It always helps to shop around, but make sure you know what cover you want when you do this and don't just be a sucker for a great looking price. If you look on comparison sites, always make sure that you check the details of the policy - you can do this by clicking through to the site of the company offering the price and viewing the policy details (these have to be available on line). If you do not feel confident that you will get all of the information that you need from the web, then I would suggest doing things the old fashioned way and picking up the phone to some of the large Brokers out there.

dunstonh

At the risk of upsetting the IFA's that use the forum, you will usually not get the best deals for Buildings and Contents Insurance from an IFA

Most IFAs cannot be bothered with the £20 or so you earn from a household policy. Its not a big earner unless you have a factory line/employees to sort it. That said, dont rule us out. We can frequently come in cheaper than the supermarkets and direct line but there will always be someone cheaper.

simply because they tend not to have access to as wide a range of products as the larger "Brokers".

IFAs dont tend to be brokers nowadays. More likely the IFAS will be intermediaries. The list of companies is likely to be in the 20 or so range. Its too much hassle and time consuming for the level of income to start trying to source more.

However, back on thread subject, I feel the OP was referring to things like income protection and life assurance where we still wont be cheaper than the execution only providers but the OP doesnt seem to be comparing like for like and if cheaper means inferior then you have to question the value of the policy.

Stu78

Thanks for the replies.

With reference to dunstonh's point regarding the life assurance, I have chosen guaranteed premiums and identical cover. The policy is with the same company (scottish provident), but the cheaper quote was through "Cavendish Online" as reccomended by Martin. I chose the one-off fee option and their website says that their commision is paid back to customers as cheaper premiums. The difference between the brokers quote and the Cavendish quote is the same as the brokers monthly commision (within a few pence) so the difference appear to be accounted for, or am I missing something else...?

As far as home insurance goes thanks to rudekid48 for the info. I have always used online comparisons, but not always chosen the cheapest result by default, I tend to go for the cheapest name I recognise and then check the level of cover, so I think I wil continue to do the same in future.

It looks to me like Mortgage brokers (well mine at least) should stick to broking mortgages! Like I said before I am very happy with the mortgage deal he has secured, but the unsolicited extras he is trying to sell me has put me off a little.

Stu

dunstonh

With reference to dunstonh's point regarding the life assurance, I have chosen guaranteed premiums and identical cover. The policy is with the same company (scottish provident), but the cheaper quote was through "Cavendish Online" as reccomended by Martin. I chose the one-off fee option and their website says that their commision is paid back to customers as cheaper premiums. The difference between the brokers quote and the Cavendish quote is the same as the brokers monthly commision (within a few pence) so the difference appear to be accounted for, or am I missing something else...?

I misread your comment. I read it initially that it was 70% lower. Not 70% of the full commission premium. 70-75% is about right when comparing a full commission basis quote to nil commission for term assurance. I had to check though as its a been a while since I did a commission basis life quote.

It looks to me like Mortgage brokers (well mine at least) should stick to broking mortgages! Like I said before I am very happy with the mortgage deal he has secured, but the unsolicited extras he is trying to sell me has put me off a little.

The broker has a responsibility and requirement to tell you what you should have. It doesnt mean you have to take them out but he is required to tell you. I dont know how it was presented to you and maybe there were flaws in the way he did it but you need to know that he has to do his job correctly. What if he didnt tell you what you needed and then didnt arrange anything and then suffered a claimable event?

You are getting it cheaper by going through a discount IFA because you are not getting advice, doing the work yourself and you are getting lower consumer protection (you cant complain to the FOS for example).

Also, dont assume you are getting whole of market availability on quote sites and dont assume any vetting has been done. In todays financial press Hargreaves Lansdown has come under attack for offering products on its execution only side which it says it would never use for advice clients as the products are rubbish. Cavendish too only offer a limited range on the pension side and can easily be beaten by full commission advisers, let alone discounted/fee based advisers by using providers and products Cavendish does not make available. To be fair, with life assurance, you are going to get a good coverage and a good deal through them but dont assume its the same for everything.

minimike2

I dont have anything to add as dunstonh has already objectively answered the question, other than to say that you cant put a price on good advice. Cheap as chips cover has many pitfalls, so unless you know what you are doing, execution only sales for cheap insurance are a false economy. The old saying is true....you get what you pay for.

Antman171

dunstonh wrote: »

Also, dont assume you are getting whole of market availability on quote sites and dont assume any vetting has been done. In todays financial press Hargreaves Lansdown has come under attack for offering products on its execution only side which it says it would never use for advice clients as the products are rubbish. Cavendish too only offer a limited range on the pension side and can easily be beaten by full commission advisers, let alone discounted/fee based advisers by using providers and products Cavendish does not make available. To be fair, with life assurance, you are going to get a good coverage and a good deal through them but dont assume its the same for everything.

When you say Cavendish only offer a limited range, which types of pensions are not available through them? Also, do you mean they can be easily beaten in terms of cost... how is this so if they are nil commission and have low amc's?

Thanks

dunstonh

When you say Cavendish only offer a limited range, which types of pensions are not available through them?

Most of the modern post A day products (personal pensions that run like SIPPs but with lower charges for example). Also, factory gate priced pensions (where commission doesnt impact on long term fund pricing)

Also, do you mean they can be easily beaten in terms of cost... how is this so if they are nil commission and have low amc's?

Yes, easily beaten on cost. Its because Cavendish only offer mono charged pensions on their execution only panel.

We did an example a while back at £100pm for a 30 year old with a stakeholder on nil commission and a factory gate priced pension with £1000 fee for advice and assuming the same growth rate (standard FSA projections) the £1000 fee option beat the nil commission option. Remember not to make the mistake that adviser remuneration is the same as the charges on the product. The adviser costs are often factored out within a short period and dont really make much of a difference over the long term. However, the provider of the pension continues to profit long after the adviser cost has been met.

Antman171

Most of the modern post A day products (personal pensions that run like SIPPs but with lower charges for example). Also, factory gate priced pensions (where commission doesnt impact on long term fund pricing)

Thanks for your reply, although i'm a bit confused by what you mean in terms of factory gate pricing? I'm also still struggling to find companies that can do a cheaper pension - could you point me in the right direction? Do you mean going to an IFA? Any help would be much appreciated.

We did an example a while back at £100pm for a 30 year old with a stakeholder on nil commission and a factory gate priced pension with £1000 fee for advice and assuming the same growth rate (standard FSA projections) the £1000 fee option beat the nil commission option.

Will i be able to find this example somewhere - might help me get my head round this? Thanks again!

JonBoy_SCFC

brokers are just taking money out of your pocket when it comes to simple products like car insurance.

That's why 100% of car insurance sales were through brokers until Direct Line launched in the 80s, and because they didn't have brokers they could do the same product but cheaper, and then grew and grew and grew ...

now i think it's down to about 25% of business that is broker originated, getting smaller each year

Broker business in car insurance is slowly but surely dying out, expect maybe for the really unusual risks