When Shopping For Financial Products, Use a Broker
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In most industries the internet has resulted in a decline of the middle man, with many businesses able to use the internet to sell direct to the consumer. Conversely, websites offering price and deal comparisons have prospered as people looking to shop around for the best price on accommodation, consumer items and the like seek out a one stop for price comparisons. Financial Product brokerages have also prospered and the reality is in most cases you are better off going through a broker, than going directly to a financial services provider.
(1) Most work for free How could this be true? Well, it's not entirely true, clearly the broker gets paid something at some point. What is true is the broker generally won't charge you for their time looking for the best product for your needs. They do all the leg work. Financial institutions like outsourcing the selling of their products - that way they don't have to have such a large internal sales and support team. Such staff are a fixed cost(infrastructure and wages) that needs need to financed week in week out, whether sales are good, or bad. It's often difficult to quickly scale up staff levels(or down for the matter) when there is a bounce or fall in the economy and financial product sales rise or dip.
Even after all the work is done, you don't pay the broker, the financial institution does and because they save so much by outsourcing much of their sales team to brokers
who are not paid a salary, financial institutions have lower costs and less risk, and can thus offer lower rates or deals on their products.
(2) Your broker can likely get you a better deal at the same institutions you visit. Some financial institutions brokers a bigger discount on their products to brokers that their direct customer, so you could end up in the situation where a bank is offering a mortgage at 5% if you go to them direct, yet, you can get the same mortgage through a broker for 4.7%. 0.3% on a $500,000 mortgage over 30 years is a lot of money.
Financial institutions know how much time and effort it takes to shop around for the best prices, and then to compare them, including all the fine print. But brokers have immediate access to many different products and prices, and are able to quickly compare them.
(3) The financial institution can only offer you its products. When you visit a financial institution and explain your needs, all they can offer you is the product they sell, which best suits their needs. This product may in fact, not be anything like the best product for your needs or the best product available.. A broker is not so limited.
(4) If new products are offered down the track - expect to hear from your broker. It's very common for financial institutions to offer special deals and rates to new customers. These deals are often not available for existing customers. Your broker knows this, and when such deals are offered to him or her, you can expect they will check their client list to see who is able to take advantage of switching financial institutions and take advantage of these special deals.
As a broker myself, I have lost count of the number of times a someone has come to me because their financial institution dropped its prices, but didn't offer the drop to existing members. Many people never find out and just pay the higher amount forever, some of these people did not find out for 10 years. That a lot of extra payments
(5) When you are applying for certain products, sometimes you get one shot. Your broker will know what should apply for first, and what information you should provide. The problem is, once you have been refused certain types of financial products these refusals may attach to your financial records and will affect your ability to get others in the future. If you had gone to a broker first, they would have ensured you applied for the policy most suitable for you in every way - suitable for your needs, but also the one you are most likely to get so you are not stuck with refused credit or life insurance on your record.
(6) Your broker wants a client for life - but they won't trap you to keep you. So do financial institutions, but they generally go about keeping you as a client in a different way. They rely on your apathy to change financial institutions, or make it difficult to do so with exit fees, early payout penalties etc, Your broker on the other hand stands to gain the most by finding you a new, better product every few years.
Thus your broker is going to be looking for products that have no exit fees wherever possible, giving you maximum flexibility if the financial institution chosen does not do the right thing by existing members.
(7) Your broker gets paid no matter which product you choose. And usually, the amount they get paid is more or less the same no matter what product they sell you so their focus is on getting you're the best product possible so they keep you as a client for life and you also recommend them to all your friends!
So if you are looking for a financial product be it a mortgage or life insurance?
Try a broker instead; you'll get a better deal.
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