When it comes to sorting out our finances, we all know the type of service a broker provides, but what about discount brokers – how many of us know exactly what they do? This article will explain how they differ from typical brokers and, more importantly, how they can benefit us.
What do they offer?
As the name would suggest, a discount broker offers comparable products to a traditional broker but at a lower price. Discount brokers usually operate on a non-advisory basis, meaning they can charge lower fees than an advice-based service – think of it as a one-stop shop for your insurance and savings needs.
The typical financial products bought with a broker include everyday insurance products such as motor legal protection, home insurance or car breakdown cover. However, they also provide savings and protection products, ranging from shared ISAs and structured products to life insurance and income protection, and this is where you’ll see the main difference between a typical and discount broker.
How does a typical broker charge?
As policies go, protection products are often long-term purchases. As such, typical brokers will sell this to you with a little extra price added on top – commission. For example, you may be offered life insurance for a monthly premium of around £10, but this isn’t all going towards assuring your protection – at least £1 will most certainly be taken by the broker as their fee for selling you the policy.
So how does a discount broker differ?
While a quid or two here and there may not sound a lot, when you consider how long you’ll be paying this premium for, the amount charged by a typical broker will be in the hundreds of pounds. Where discount brokers differ is this fee: rather than taking an amount over the term of the policy, they charge a fixed sum at the moment you purchase it, usually between £20 and £30. Best of all, this will be for the exact same policy offered by a traditional broker, so you won’t be compromising on your amount or quality of cover. How’s that for saving money?
What’s the catch?
The only potential downside to buying through a discount broker is that, as mentioned, they’re non-advisory. Some consumers will feel more confident in their purchase after receiving financial advice, but more and more people are taking their financial matters into their own hands. With the wealth of information available online, it really isn’t too difficult to work out what you need and where to get it, so if you’re a self-starter then you needn’t worry.
Why don’t I know about them already?
A large share of the financial services market is held by traditional brokers, but this is being challenged by discount brokers like Best Price FS. As a method of distribution, these brokers are still fairly new, so it’s unsurprising that they’re not so well-known by the general public. However, due to the unique pricing structure they use, there certainly is scope for the consumer to make some considerable savings. Sites like Money Saving Expert certainly seem to think so, as they provide information on discount brokers when giving advice on life insurance and other such products.
So with the super savings to be made and consumer sites singing their praises, it seems it’s only a matter of time before the consumer public catches on to discount brokers. Why not get a step ahead and try one today? With the cut in costs you’ll see, you may just thank yourself.
