So, our big-name competitors in the price-comparison marketplace got a right royal spanking yesterday. Quite right, too. Few can say they didn’t see it coming, and I don’t know quite how they dare look as shocked as they do.
The price-comparison space is just like any other industry. It starts out with the best of intentions. Then the power and the money come into play and it all starts getting opaque and more than a little misleading.
We’re businesses, that much is clear. Some of us are out there for survival – the big fish are not. They’re raking in hundreds of millions in profit every year.
That tells you two things: firstly, that there’s plenty of money to be made from directing customers towards deals; and secondly, that deals could be better still if lenders weren’t chucking such a vast quantity of money at comparison sites trying to secure extra business.
The Financial Conduct Authority has already launched a probe into price comparison websites to identify whether they are misleading customers by promoting deals that generate more revenue rather than offering better value.
And if you look at the ownership of some leading comparison sites, that doesn’t do the industry any favours either. Confused.com is owned by insurance group Admiral, while GoCompare is part-owned by Esure.
Potential conflicts of interest emerge everywhere. As a consumer, how can you guarantee that you are being shown the best deal? It’s muddy water, for sure.
The latest fiasco regards energy tariffs, a hot topic in the personal finance world. The industry has come under a lot of pressure to make its pricing and tariffs simpler and to remove the barriers to switching.
While you can now switch bank accounts in just a week, it can still take longer than a month to switch energy suppliers.
Energy costs remain a major concern to households as incomes have stagnated, but too many customers remain baffled by pricing or unaware of better deals.
You’d think price-comparison sites would be the ideal solution, right?
“Wrong”, says the Big Deal, which (if you’ll forgive the pun) has well and truly shopped its rivals.
The Big Deal, which uses the bulk-buying power of subscribers to negotiate cheaper deals from energy suppliers, says that some leading price-comparison websites manipulate their navigation so that customers end up seeing the deals that pay the most commission.
With some energy suppliers paying up to £60 a time to land customers, you don’t wonder that sites are incentivised to push these deals in whichever way they can.
Of course, the sites in question have come out defending their corner. Owning up to dodgy morals would be a PR disaster, wouldn’t it? But even this reveals further complications.
MoneySuperMarket reminds us that some providers choose not to list products on comparison websites. But that’s not to say why they can’t be mentioned.
This reminder also ignores the thorny issue of exclusivity agreements, which limit products to high profile websites and monopolise the entire marketing budget.
Before we go further – let’s not claim that price-comparison sites are the only ones to be influenced here. I noticed with interest that a story criticising NatWest and RBS was removed from the front page of ‘This is Money’ not long ago once advertising banners from the bank cluttered the page.
Money talks, unfortunately. We’d be naïve to believe otherwise.
Get them to tell you why X is the best
Customers will have to accept – for the moment at least – that they will have to work a little bit harder to ensure they are getting the very best deal and the best information rather than assuming that a leading price-comparison site will do it for them.
But what you might do as a start is keep an eye on the news. It’s relatively easy for sites to get you to tick a few boxes to display what they want you to see.
What they can’t do is make factual claims that are wrong. If you want to know why X is the best credit card or the best mortgage, check out news and reviews as well. You don’t need to just accept the position at the top of a ‘best buy’ or ‘best selling’ table as your answer.
Case in Point
Let’s demonstrate: today, at Which4U, we’ve written about Woolwich Mortgages. They’ve cut several of their fixed-rate deals by up to 0.80%. But some are still slightly undercut by Platform Mortgages, and one is undercut by the Cumberland Building Society.
These brands won’t earn us a great deal. Neither will the West Bromwich Building Society, Monmouthshire, or many of the other great local lenders that have been outperforming major banks on value for the last few years.
We’ve also tried hard in recent months to demonstrate why you shouldn’t choose your mortgage entirely based on rate, as arrangement fees are often significant in determining which product proves to be of best value.
What we’re inviting you to do is to learn more about the context of a product before you sign up, which will help you figure out which is right for you.
Most comparison sites will help you get a ‘better’ deal. It’s tougher to guarantee that you’re landing the best.
Lamentably, we don’t always have the best products available in every category. But by acknowledging that they exist in our daily material, we hope you’ll know the comparable value of what we do list, and place some trust in our listings when we explain the values of our available products.
Faith is a hard-sought after thing in the financial sector right now. It’s tough luck that our rivals continue to test it.