Getting your head around financial products can be stressful. The ever-growing amount of advertising can quickly become ‘noise’ – making it difficult to differentiate between products, their benefits and whether or not you need them.
It’s easy to see why almost a fifth (18%) of adults find managing finances overwhelming. Despite this, there’s even more uncertainty when it comes to asking for professional help. According to YouGov, 22% of people say speaking to a financial adviser is stressful – almost 1 in 5 say they wouldn’t know the right questions to ask, and people find speaking to an adviser more overwhelming than managing their own finances.
Brian Brown, Head of Insight & Consulting (General Insurance and Banking) from leading financial information, ratings and fintech business, Defaqto, explains how to cut through the noise and ensure you’re making a more informed decision.
“It could be perceived that seeking financial advice is for a select few, but this isn’t the case. And it’s these misconceptions around seeking professional advice that can leave consumers open to financial risk when they may not need to be. There are ways to take a smarter, more confident approach.
“Thanks to price comparison sites becoming more prolific over the years, many consumers have felt more empowered to make financial decisions. However, because of how the information is presented people could be forgiven for wrongly assuming that when sourcing products, it’s all about price. While, for many, price is important that’s simply not the case when it comes to some areas such as insurance; the benefits and differences between each offering aren’t always obvious.”
There’s a lack of general knowledge around financial products, too – 45% of people say they don’t feel confident understanding what ‘AER’ means and 46% say the same about the phrase ‘variable rate’.
“This is where it pays to buy on advice, not price. Lack of understanding coupled with an overwhelming amount of information and products is a recipe for disaster,” explains Brown. “One of the key benefits of consulting a professional adviser is that they don’t only compare price – rather it’s the quality and suitability of a product that’s a priority. An adviser will dig into what a client needs, so it becomes less about price and more about value for money.”
Defaqto’s experts research and analyse the terms and conditions for every product on the market and rate them on a scale of 1 to 5 based on the quality and comprehensiveness of the features and benefits they provide. A 1 Star Rating indicates a basic product, with a low level of features and benefits, while a 5 Star product provides one of the highest quality offerings in the market.
Brown concluded: “Our ratings are different to consumer reviews as they’re based on facts, not opinion. And it’s not just consumers who use our ratings. Our experts have designed them to be used throughout the financial advice journey, so they’re widely used by advisers to support research and decision-making for clients. Star Ratings criteria are reviewed annually to ensure that new features are included in the scoring process where appropriate, so that the criteria are as relevant as possible.
“Our research shows that 9 out of 10 consumers are more likely to choose a product with a Star Rating over a product with similar features and cost but showing no rating – it’s a no brainer.”
Next time you’re sourcing a new financial product – go armed with the confidence to ask questions and the intel provided by Defaqto’s Star Ratings and you’re perfectly placed to discuss which product could be the most suitable for you.